There is a gloomy outlook from the Organisation for Economic Cooperation and Development in its latest updated economic forecasts.
The OECD sees a slump in trade growth and a weakening of global economic growth this year and next. It warned globalisation – which has been driving growth for years – may have stalled.
Behind that trend it cites China’s moves to wean its economy off exports, some firms bringing production back to their home countries and a growing backlash against trade liberalisation as well as recessions in some big commodity-producing countries.
OECD Chief Economist Catherine Mann said: “Since 2012 basically we have a flat line global growth at about 3 percent and going into our projections for 2017 it is a little bit better but not much.”
The forecast update is for 2.9 percent global growth this year and 3.2 percent next year.
Mann warned that would be too little to generate the jobs that young people expect and to respect pension promises to the elderly.
“This is not a pretty picture for global growth,” she said. “Across the board a 3 percent growth rate is insufficient to keep promises to citizens.”
The OECD also trimmed its outlook for the US and the eurozone.
Mann said: “Our downgrades focus on the euro area. With pretty much across the board downgrades. Why? Some of it has do to with individual country circumstances but of course the decision about Brexit in June, the referendum vote, is weighing heavily on our expectations for growth in the real economy in the euro area in 2017.”
Brexit vote effect
The latest OECD Interim Economic Outlook sees Britain’s economy suffering less than initially feared due to the vote to leave the European Union.
The forecast for the UK is raised slightly for this year from 1.7 percent to 1.8 percent but halved next year from 2 percent to 1 percent.
The OECD said: “In the longer term, the UK’s future trading arrangement with the EU and other partners will be critical to its economic prospects.”
British finance minister Philip Hammond responded: “The OECD highlights uncertainty in their outlook, and while I recognise that there may be some difficult times ahead, I am confident that we have the tools necessary to support the economy as we adjust to a new relationship with the EU…”
Hammond is due to make his first mid-year budget statement on November 23rd. He has said he will delay plans to achieve a budget surplus for the UK and he will consider some modest increases in spending to help the economy.
Also on Wednesday, the Bank of England said investment and employment are likely to be flat over the coming year because of the Brexit vote.
That was based on its latest surveys of businesses which found signs of resilience in consumer spending and the housing market so far, but also detected a growing reluctance among businesses to hire and invest.
That leaves the UK central bank on track to cut interest rates again in November to slightly above zero.