Global economy caught in low-growth trapPoor global growth expectations are having the effect of further depressing trade, investment and wage growth. OECD projects modest recovery in 2017 0 The global economy is projected to grow at a slower pace this year than in 2015, with only a modest uptick expected in 2017, according to the Organisation for Economic Cooperation and Development (OECD). In its latest report released on Wednesday entitled Interim Economic Outlook, the OECD said weak trade growth and financial distortions are exacerbating slow global economic growth.
In the report, the OECD projects the global economy will grow by 2.9% this year and 3.2% in 2017, well below long-run averages of around 3¾%.
The report warned that a low-growth trap has taken root, as poor growth expectations further depress trade, investment, productivity and wages. “Global trade growth has slowed to half its pre-crisis rate, contracting at the start of 2016 with the current weakness concentrated in Asia,” said OECD.
Worryingly though is revelations that rebalancing in China and a reversal in the development of global value chains could signal “permanently” lower trade growth, leading to weaker productivity growth.
“The sharp slowdown in world trade underlines concerns about the robustness of the economy and the difficulties in exiting the low-growth trap,” said OECD chief economist Catherine L. Mann.
“While weak demand is surely playing a role in the trade slowdown, a lack of political support for trade policies whose benefits could be widely shared is of deep concern.”
The small downgrade in the global outlook since the previous Economic Outlook in June 2016 reflects downgrades in major advanced economies, notably the United Kingdom for 2017, offset by a gradual improvement in major emerging-market commodity producers.