Trade war could derail global economic recovery, warns OECD

  • Trade war could derail global economic recovery, warns OECD

Trade war could derail global economic recovery, warns OECD

As the US prepares to impose tariffs on steel and aluminum imports, a world economic watchdog warned Tuesday that such barriers will hurt economic growth globally.

Updating its outlook for G20 economies, the Organisation for Economic Cooperation and Development (OECD) raised its global growth forecast for both 2018 and 2019 to 3.9 per cent - the highest since 2011 - from a previous estimate of 3.6 per cent for both years.

Robust exports to Asia and the effect of a supplementary budget for fiscal 2017 through March will help support Japan's economic growth, the OECD said as it lifted its forecasts for the world's third biggest economy also for both years.

The thinktank has revised up its forecast for United States growth by 0.4 points to 2.9 percent this year and by 0.7 points to 2.8 percent in 2019 as a result of the increase in demand from Mr Trump's tax cuts.

OECD acting chief economist Alvaro Pereira warned the US President's announced tariffs of 25 percent on imported steel and 10 percent on imported aluminium, had left the global economy vulnerable to a tit-for-tat war.

The OECD said investment, trade and employment were all playing a part in a broad-based expansion that has prompted growth upgrades for six of the seven G7 countries.

In November 2017, the OECD predicted an increase of 3.6 percent for 2017 and 2019, and a rise of 3.7 percent for 2018.

However, the growth rate is still very slow compared to other G20 nations, and well below the average for the group, which is expected at 4.1% in 2018 and 4.0% in 2019.

"This could obviously threaten the recovery". Previously the OECD had estimated three hikes would suffice this year. "Certainly we believe this is a significant risk, so we hope that it doesn't materialize because it would be fairly damaging", Pereira said.

For South Africa, the OECD has revised the expected GDP growth rate upward to 1.9% in 2018, and 2.1% in 2019 - higher than the growth rate now targeted by National Treasury.

Britain was seen missing out on the global upturn, lagging all other G-20 countries with growth of only 1.3 percent this year.

In contrast, stronger growth in France and Germany boosted the outlook for the broader eurozone to 2.3 percent for this year and 2.1 percent in 2019. In Germany, growth is seen coming it at 2.4 per cent this year and 2.2 per cent next, up from 2.3 per cent and 1.9 per cent previously.