OECD trims economic outlook over trade and EM woes

Paris

GLOBAL economic growth has peaked in the face of rising trade frictions and emerging market turbulence, the Organisation for Economic Co-operation & Development (OECD) said on Thursday, as it trimmed its earlier outlook.

The world economy is on course for growth of 3.7 per cent this year and next year, up from 3.6 per cent last year, said the OECD.

In its previous economic outlook in May, the Paris-based policy forum had forecast growth of 3.8 per cent this year and 3.9 per cent in 2019, but it said in an update on Thursday that growth had peaked since those last projections were made.

The OECD said trade growth, the engine behind the global upswing in recent years, had slowed this year to around 3 per cent from 5 per cent in 2017 as tensions between the US and its major trade partners weighed on confidence and investment.

"Export order books have started to decline and that has been going on for a few months and what that means is the deceleration in trade growth will continue," OECD chief economist Laurence Boone told journalists. "We are seeing the rise of protectionism biting into our outlook."

Even though the US is the source of these trade frictions, the economic outlook for the US was nevertheless the brightest among the OECD's major developed economies, thanks to tax cuts and government spending.

The OECD left its forecast for US growth this year unchanged at 2.9 per cent, but trimmed the forecast for next year to 2.7 per cent, from 2.8 per cent previously.

It said that US import tariffs were beginning to have an impact on the world's biggest economy, estimating that those already imposed would lift overall US prices 0.3-0.4 per cent.

Meanwhile, the OECD said that a weaker currency had so far helped China - which is not an OECD member - absorb the impact of higher US tariffs, leaving its growth forecasts unchanged at 6.7 per cent for this year and 6.4 per cent for next year.

Rising US interest rates and a stronger US dollar spelled trouble for emerging market economies such as Argentina, Brazil and Turkey, the OECD said, slashing its forecasts for those three countries. REUTERS