The global economy is at risk of settling into a low-growth rut without urgent action to roll back recently erected obstacles to trade and greater investment in tackling climate change, the Organization for Economic Cooperation and Development said Thursday.
The OECD's chief economist Laurence Boone said that, though central banks have been easing decisively and have paved the way for structural reforms and bold public investment to raise long-term growth, fiscal policy introduced by governments around the world has been "only marginally supportive". The organization made the cut after holding its forecast steady at 2.1 percent in May and September.
"Two years of escalating conflict over tariffs, principally between the USA and China, has hit trade, is undermining business investment and is putting jobs at risk", the Paris based organisation said.
In its quarterly assessment of the global economy, the OECD predicts growth will not accelerate next year and only moderately in 2021.
World GDP growth is expected to be 2.9% this year - its lowest annual rate since the financial crisis - and remain at 2.9%-3.0% in 2020 and 2021.
Without clear policy direction on these issues, "uncertainty will continue to loom high, damaging growth prospects", she added.
Among the major economies, USA growth was forecast at 2.3 per cent this year, trimmed from 2.4 per cent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among the United States' trading partners.
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Other emerging-market economies are expected to recover "only modestly", Boone said.
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Climate change too is among the top risks. China, meanwhile, is rebalancing away from a reliance on exports and manufacturing towards consumption and services. Countries including the US, India, and Argentina saw GDP projections revised lower this year, while 2020 growth projections in Europe, Saudi Arabia and Indonesia dropped.
"Any further escalation of the trade conflict would disrupt supply networks and weigh on confidence, jobs and incomes".
The UK economic outlook has also improved, with the year now expected to close with 1,2% growth, up from 1% projections in September.
For the OECD, strengthening global cooperation is crucial, particularly the need to agree on transparent and fair worldwide taxation and trade rules.