Potential trade war threatens global economic growth, OECD warns

13 March, 2018, 14:12 | Author: Regina Silva
  • Potential trade war threatens global economic growth, OECD warns

An escalating trade war is one of the only things standing in the way of the global economy growing at its fastest pace since 2010 this year and next, according to the influential Organisation for Economic Co-operation and Development (OECD).

A seagull flies by as cargo ships and an offshore supply vessel lie at anchor at sunrise off Sousse, Tunisia February 14, 2018.

As downside risks, the report cited persisting gestures of trade protectionism, the normalization of monetary policies in key countries, demographic changes and a decrease in mid- and long-term investment.

City and academic economists expect the United Kingdom economy to expand at an annual pace of 1.5% over the next two years, and Chancellor Philip Hammond is expected to reveal a more optimistic outlook in updated official forecasts on Tuesday.

Upgrading its forecasts, the Paris-based group in part cited USA tax cuts for the better numbers.

"Growth is steady or improving in most G20 countries and the expansion is continuing", said OECD acting chief Economist Alvaro Pereira, "[But] an escalation of trade tensions would be damaging for growth and jobs".

The OECD projects that the global economy will grow by 3.9% in both 2018 and 2019, with private investment and trade picking up on the back of strong business and household confidence.

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Financial markets have been hit by fears of a trade war following U.S. President Donald Trump's move to slap tariffs on steel and aluminum imports.

"This could obviously threaten the recovery". That's up from 3.7 per cent and 3.6 per cent respectively compared with its November projections.

With Britain due to leave the European Union next year, its economic growth was seen easing to 1.1 percent in 2019, unchanged from the OECD's November estimate.

By contrast, growth in the global economy is expected to strengthen further from its six-year high of 3.7% in 2017 to reach 3.9% in 2018 and 2019.

Robust exports to Asia and the effect of a supplementary budget for fiscal 2017 through March will help support Japan's economic growth, the OECD said as it lifted its forecasts for the world's third biggest economy also for both years.

The eurozone economy will likely see a robust and broad-based expansion, with growth in gross domestic product estimated at 2.3 percent this year and 2.1 percent next year.

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