Trade tensions and political uncertainty, including Brexit, are weighing on the world’s economy, the Organisation for Economic Co-operation and Development (OECD) warned as it again cut its 2019 forecast for global economic growth to 3.3% for the current year, down from 3.5% it predicted earlier.
“High policy uncertainty, ongoing trade tensions, and a further erosion of business and consumer confidence are all contributing to the slowdown,” the OECD said in an interim version of its Economic Outlook.
The OECD revised growth downwards in almost all of the countries in the G20 group of industrialised and emerging nations. The 19-nation eurozone was particularly hard hit, with predicted growth dropping from 1.8 per cent to 1 per cent.
Growth forecast for European powerhouse Germany sunk to 0.7 per cent from 1.4 per cent, while Italy’s was slashed from 0.9 per cent to -0.2 per cent.
The OECD said the sharp downturn in the two countries reflected “their relatively high exposures to the global trade slowdown compared with that of France”, which slipped from 1.5% to 1.3%. “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 was chopped from 1.4 to 0.8 percent, which would mark the first time it had fallen below one percent since 2009 following the global economic crisis. However, the OECD emphasised that even this projection was based on the assumption of a smooth Brexit.
If Britain crashes out of the European Union without a deal on future economic relations, the OECD said its outlook would be “significantly weaker”. With just 23 days remaining 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.
Growth for China, which is facing an economic slowdown, was revised down slightly to 6.2 per cent from 6.3 per cent for this year and steady at six percent for 2020.
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.