Source: Small Island Developing States
Climate change, changing business models, and geopolitical tension are threatening to slow economic growth around the world – and lower living standards – in the coming years, according to the 2019 Economic Outlook from the Organisation for Co-operation and Development (OECD). By the end of 2019, the world’s gross domestic product (GDP) growth is expected to be at its lowest rate since 2008 financial crisis, and to remain at that level in 2020 and 2021.
The OECD publication reports that aggregate investment growth in the countries in the Group of 20 (G20), excluding China, slowed from an annual rate of 5% in the beginning 2018 to 1% in the first half of 2019. In the US, growth is forecasted to slow to 2% in 2020 and 2021, and to around 1% in the Euro area and Japan. China is expected to decelerate from 6.6% to 5.5% in 2021. If governments do not take action to address the structural causes of this slow-down, the international community is heading towards a future of declining living standards, warned OECD Secretary-General Angel Gurría.
The 2019 Outlook identifies these structural causes:
- two years of escalating conflict over tariffs, principally between the US and China;
- uncertainty about a future EU-UK trade relationship;
- the high level of corporate debt;
- the transformation of the business models by digitalization; and
- the disruption caused to existing patterns of activity by climate and demographic changes.
To address these structural issues, OECD highlights that policymaking “must lead” the transition to cleaner energy and to an increasingly digital world. It calls on governments to work together “urgently” to establish fair international rules on taxation and trade, and boost investment. [OECD Press Release] [Publication: OECD Economic Outlook 2019] [Interactive Landing Page]