World Economic Growth May Have Peaked

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The world economy is facing a slowdown due to escalating tensions over trade, political uncertainty and tightening financial conditions in emerging markets.

The Organisation of Economic Co-Operation and development (OECD) predicts the global economy is set to grow by 3.7% this year and in 2019.

The rate of growth will vary between countries, say economists.

Predicted GDP in China (6.4%) and India (7.4%) will be around double the global average, while Indonesia will hit around 5.3%.

But the economies in Argentina (0.1%) and Turkey (0.5%) will fare much worse, with the rest of the OECD nations achieving growth of around 2%.

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Trade tensions

“Trade tensions are starting to bite, and are already having adverse effects on confidence and investment plans,” said OECD Chief Economist Laurence Boone.

“Trade growth has stalled, restrictions are having marked sectoral effects and the level of uncertainty on trade stances remains high. It is urgent for countries to end the slide towards further protectionism, reinforce the global rules‑based international trade system and boost international dialogue, which will provide business with the confidence to invest.

“With tighter financial conditions  creating stress on a number of emerging economies, especially Turkey and Argentina, a strong and stable policy framework will be key to avoid further turbulence.”

The OECD wants governments to boost productivity to counter the slowdown.

Wages and inflation set to rise

Research by the OECD suggest global growth may have peaked and will settle at around 3.5%.

Unexpectedly, wages and inflation are still low, but are likely to rise.

“Trade restrictions will harm jobs and living standards, particularly for low-income households,” says the report.

“A decade after the financial crisis, vulnerabilities remain in financial markets from elevated asset prices and high debt levels. Reforms have strengthened the banking system, but risks have shifted towards less tightly regulated non-bank institutions.

“Further fiscal and banking reforms are needed to strengthen resilience in the euro area.”

OECD – GDP growth by country 2017 – 2019

Source: OECD

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