The growth of the world economy has reached its peak, according to the OECD

The growth of the world economy has reached its peak, according to the OECD

Source: El Economista
21/11/2018

The Organization for Economic Cooperation and Development (OECD) noticed today that the world economy has reached its peak in 2018 and that next year will start a slowdown as a result of trade tensions, stricter financial conditions and rising prices of the oil.

In its semi-annual report, the OECD places in 3.7% the advance of the Gross Domestic Product (GDP) in 2018 and it drops it in two tenths by 2019, to 3.5%, making a forecast of the same figure for 2020.

The report also reveals that although labor market conditions continue to improve – the OECD unemployment rate is currently at its lowest level since 1980 – the growth of investment and trade has been milder than expected and the confidence in the markets is not yet completely stablished. The commercial tensions increased the uncertainty to make business; the commercial tensions between the United States and China on the one hand, and the political and geopolitical uncertainty in Europe (caused by the “Brexit” in Great Britain), in the Middle East and Venezuela on the other, are factors that generate doubts in the investors.

In addition, the global financial crisis, against which we have been fighting for ten years, continues to cause adverse effects in the weakest and least developed economies, despite the policies applied to mitigate it.

Among its general recommendations, the report states that it is “vital” not to repeat previous errors, such as the introduction of measures to containing imports, and stresses that macroeconomic policies should minimize the accumulation of financial vulnerabilities and guarantee that there are room for maneuver in case of future setbacks. Governments should encourage low interest rates to coordinate a fiscal stimulus; in the case of the EU it also recommends to urgently complete the banking union and to reach an agreement with the United Kingdom that maintains the “closest relation as possible” between the parties.