The Organization for Economic Cooperation and Development on Thursday downgraded its assessment of the global economy to the worst growth rate since the financial crisis.
In its interim economic outlook, the Paris-based agency cut its global GDP view to 2.9% this year, a downgrade of 0.3 percentage points, and its growth view for 2020 was reduced by 0.4 percentage points to 3%.
The OECD cut its view of U.S. growth by 0.4 points in 2019 to 2.4% and by 0.3 points in 2020 to 2%. China’s GDP forecast was cut by a tenth in 2019 to 6.1% and by 0.3 points in 2020 to 5.7%.
“Escalating trade policy tensions are taking an increasing toll on confidence and investment, adding to policy uncertainty, weighing on risk sentiment in financial markets, and endangering future growth prospects,” the OECD said.
The OECD said the impact of 2019 U.S-China trade tensions would be to reduce Chinese GDP by a full percentage point, U.S. GDP by 0.7 points and world GDP by 0.6 points. A no-deal Brexit could cut U.K. GDP by nearly 3 percentage points in 2022, and eurozone GDP by 0.6 points.
Investors are holding massive amounts of risky debt, the OECD said, pointing to leveraged corporate loans in particular. Another concern is the long-term decline in trend growth could persist.
The OECD said governments are in a position to reverse the spiraling costs of uncertainty and invest more, and meeting infrastructure investment could help limit the risks to growth.
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