World GDP growth peaks and will continue at slower pace -NIESR

Global output growth will continue but at a slower pace than that seen over the last two years, according to one of the country's top think-tanks, who also said that the economic cycle had now peaked.

Nonetheless, this decade will have seen sustained global GDP growth averaging 3.8% a year, the National Institute of Economic and Social Research said in a report.

Increased trade tariffs, especially between China and the US, the withdrawal of monetary policy accommodation by the US Federal Reserve in 2017 and 2018, economic problems in Argentina, Venezuela and Turkey, the rise in oil prices throughout much of 2018, difficulties in the European car market, and a slowdown in China all contributed to the slowdown, feeding uncertainty around the global economic outlook, NIESR said.

On the other hand, slightly faster wage growth in advanced economies and tighter labour markets had increased the odds of higher inflation, but the fall in oil prices should, together with slowing output growth, should cap any widespread pick-up in price pressures, the researchers said.

Indeed, should it be required, continued low inflation might pave the way for central banks to increase monetary accommodation in order to support economic activity.

As a result, NIESR expected any further tightening in monetary policies to be limited and may possible give way to widespread easing, with China and the euro area having already done so, the latter via the European Central Bank's so-called 'forward guidance'.

“While the average annual rate of GDP growth in the second decade of the 21st century has been slower than in the years before the Great Recession the decade looks set to have been a less volatile one for global output growth than the first decade of this century.”