OECD cuts global economic growth forecasts; warns against no-deal Brexit

The Organisation for Economic Co-operation and Development has warned that the global economy is weakening, with UK economic growth forecast to dip below 1% this year for the first time in a decade.

Publishing its interim economic outlook, the OECD said prospects for nearly all the G20 countries were now weaker. It argued: “Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.”

The Paris-based think-tank is forecasting that the global economy will grow by 3.3% in 2019, a downward revision on its previous forecast of 3.5%, and by 3.4% in 2020.

The OECD said downward revisions for individual countries were “particularly significant” for the UK, Germany, Italy and the wider eurozone, Canada, and Turkey.

In the UK, the body said that under an agreed Brexit, which it assumed would include a transition period to 2020, growth would dip to 0.8%. It said there had been a steep fall in investment by UK firms since the 2016 referendum.

However, the body warned that the outlook would be “significantly weaker” if the UK quits the bloc without a deal. It predicts that the impact of WTO tariffs would reduce UK GDP by around 2% in the next two years.

In the eurozone, the OECD is predicting growth of 1% for 2019, against a previous prediction of growth of 1.8%.

OECD chief economist Laurence Boone said: “The global economy is facing increasingly serious headwinds. A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets.”

She continued: “Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn.”