Chief economist of the Organisation for Economic Co-operation and Development, Laurence Boone. Picture: AFP/ERIC PIERMONT
Chief economist of the Organisation for Economic Co-operation and Development, Laurence Boone. Picture: AFP/ERIC PIERMONT

Paris — The Organisation for Economic Co-operation and Development (OECD) trimmed its outlook for the global economy on Thursday, saying the world was headed for its weakest economic growth since the 2007/2008 financial crisis.

Urging governments to invest in digital and climate transformation, the OECD said activity has been hobbled by weaker trade and investment in the past two years, as US President Donald Trump and Chinese leaders continue to be locked in a trade conflict.

The OECD now expects economic activity around the world to expand by 2.9% in 2020, a decline of 0.1 percentage points from a previous forecast issued in September.

Growth is likely to remain slow, it said, with expansion in 2020/2021 seen at about 3%, down from a 3.5% rate projected only a year ago. This was shaping up to be “the weakest rate since the global financial crisis”, according to OECD chief economist Laurence Boone.

Growth in 2019 is also likely to come in at 2.9%, the OECD said in its November “Economic Outlook”.

Boone noted that “for the past two years, global growth outcomes and prospects have steadily deteriorated amid persistent policy uncertainty and weak trade and investment flows”. She said that central banks have taken decisive and timely monetary decisions that partly offset the negative effects of trade tensions.

However, governments have not done the same, instead failing to invest enough in long-term projects to improve infrastructure, advance digitalisation of their economies, or in the fight against climate change.

Boone warned that the OECD is concerned the outlook will deteriorate further due to “unaddressed structural changes more than any cyclical shock”.

She highlighted climate change and digitalisation as two examples, along with the fact that “trade and geopolitics are moving away from the multilateral order of the 1990s”.

A breakdown of the forecasts showed that the US economy, the world’s biggest, is tipped “to slow to 2% by 2021, while growth in Japan and the euro area is expected to be about 0.7% and 1.2%, respectively,” the report said.

In China, the world’s second biggest economy, growth is forecast to “continue to edge down, to about 5.5% by 2021”, it added.

Boone said that other emerging-market economies are expected to recover “only modestly”. 

AFP