The Organisation for Economic Co-operation and Development lowered its forecast to 3.3 per cent for this year, down from the 3.5 per cent it predicted in November. The November forecast itself was a downgrade from a previous 3.7 per cent.
The Organisation for Economic Co-operation and Development has warned that trade tensions and political uncertainty including Brexit are weighing on the world's economy, say media reports. It slashed its 2019 forecast for global economic growth to 3.3 per cent for 2019, down from the 3.5 per cent it had forecast in November. Notably, the November forecast was also a downgrade from a previous 3.7 per cent.
"High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,”media reports quoted the OECD as saying in an interim version of its Economic Outlook.
The OECD revised growth estimates is lower for almost all of the countries in the G20 group of industrialised and emerging nations.
The predicted growth for the 19-nation eurozone has dropped from 1.8 per cent to one per cent. The forecast for Germany, the European powerhouse, has been slashed to 0.7 per cent from 1.4, while Italy's fell from 0.9 per cent growth into a recession at -0.2 per cent.
The sharp downturn in the Germany and Italy reflects "their relatively high exposures to the global trade slowdown compared with that of France", which slipped from 1.5 per cent to 1.3, OECD said.
"Substantial policy uncertainty remains in Europe, including over Brexit. A disorderly exit would raise the costs for European economies substantially," the OECD said.
Britain's growth forecast dropped from 1.4 to 0.8 per cent, which would mark the first time it fell below one per cent since 2009 following the global economic crisis.
However, even this projection was based on the assumption of a smooth Brexit, the OECD said.
The outlook for Britain would be ”significantly weaker" if it exists the European Union without a deal on future economic relations, the OECD said.
Just 23 days remain before the scheduled Brexit date March 29. The latest round of talks between Britain and the EU aimed at getting their deal through the British parliament ended on Tuesday, reports said. However, "no solution" had been found to break the deadlock, chief EU negotiator Michel Barnier said.
A disorderly no-deal Brexit would likely send Britain into a recession and the knock-on effects could spill over into Europe and beyond, OECD warns.
"OECD analysis suggests that the increase in tariffs between the two economies as a result of WTO rules coming into effect would reduce GDP by around two per cent (relative to baseline) in the United Kingdom in the next two years,” report said.
"Although contingency measures to soften the impact of a no-deal outcome are being taken by both sides, UK-EU separation without an agreement would still be a major adverse shock for Europe and possibly elsewhere in the world,” OECD added.
OECD also pointed to the ongoing trade war between China and the US saying, restrictions imposed last year – notably by the United States and China – are "a drag on growth, investment and living standards, particularly for low-income households”.
The two biggest economies of the world are working on trade negotiations, but other risks remain even if they do reach a deal, including potential US tariffs on European car imports, the OECD warned.
"This would hit Europe particularly, where motor vehicle exports represent around one-tenth of total EU merchandise exports to the United States," it said.
China is facing an an economic slowdown ands revised its growth forecast down slightly to 6.2 per cent from 6.3 per cent for this year and is steady at six per cent for 2020.
However "a sharper slowdown in China would hit growth and trade prospects around the world”, warns OECD.
OECD chief economist Laurence Boone said the "global economy is facing increasingly serious headwinds.”
"A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets," Boone added in a statement.
"Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn,” Boone said.
Source: https://www.moneycontrol.com/media reports