OECD: High uncertainty negatively impacting global economy

“Global GDP grew at a solid rate of some 3.7 percent in the first half of 2018, but there are indications that the growth rate may have reached its limits,” OECD said in a report titled High Uncertainty Weighing on Global Growth.

They estimate that the growth rate will stabilise at around 3.7 percent in this and the following year, which is 0.1-0.2 percent less than their earlier estimate, from May this year.

Among the factors hindering growth they singled out slow growth rate in trade, which was 3 percent in the first half of 2018, compared to 5 percent from 2017.

The stagnation came as a result of US President’s motto America First, which led to a trade conflict with China, world’s second largest economy, and at the same time increased pressure on US’ trade partners in Europe.

Donald Trump announced this week the US would impose new, 10 percent, tariffs on 200 billion worth of Chinese goods, threatening with more tariffs in case China decided to retaliate.

The additional tariffs are on top of penalties from earlier this year on $50 billion worth of Chinese goods. Taken together, it means roughly half of the products that China sells to the United States each year will be hit by American tariffs.

OECD warned that trade tensions were increasing the state of uncertainty which was detrimental for both the developed and developing economies.

“Raising tensions further would have significant negative effects on global investments, jobs, and living standards,” OECD said.

Many new jobs were created, especially in developed economies, they said, adding that “growth in wages was still moderate” which makes low-income households especially vulnerable.

Tariffs have already had measurable consequences in certain sectors, they said.

In the first half of 2018 saw a drop in imports of washing machines, solar panels, steel, and aluminium in the US, OECD said, adding that “the domestic prices in those sectors increased significantly.”

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