Trade tensions and rising interest rates mean harm to the global GDP: the global economy will tail off according to the OECD forecast.
The Organization for Economic Cooperation and Development (OECD), an establishment with a mission to promote policies that will improve the economic and social well-being of people around the world, tells us that the global economic growth remains strong but 2019's global GDP growth is now expected to be 3.5% instead of last May's projection of 3.7%.
OECD Secretary-General Angel Gurría suggested that „one major reason for this setback is a breakdown in co-operation. The imposition of new tariffs and uncertainty about further restrictive trade actions are contributing to a marked slowdown in trade growth, dampening global investment and threatening jobs and living standards" Furthermore Angel Gurría believes that protectionism will not solve this issue and a coordinated response is needed.
One of the biggest issues which make the safeguarding of the multilateral system difficult is the trade war of China and the US. What is more, the US may impose even more tariffs on all Chinese goods. A full-scale trade war would mean a 0.8% off from the global GDP.
The countries at risk of this slowdown are the non-OECD countries for example South Africa, due to the capital outflows on account of the United States' rising interest rates. A global slowdown also threatens bigger economies: Germany is negatively affected by the US-China trade war, since it caused a decline in car exports.
Laurence Boone, OECD Chief Economist said that "there are few indications at present that the slowdown will be more severe than projected. But the risks are high enough to raise the alarm and prepare for any storms ahead. Cooperation on fiscal policy at the global and euro level will be needed."
All these facts tell us that there is a strong need for global cooperation if we want the global GDP growth to creep up. Luckily the G20 summit in Buenos Ares between the 30th of November and 1st of December will provide the opportunity to solve this issue: the future of the global economy is beginning to be in the hands of the G20 leaders.
(Sources: OECD, CNBC, The National, Al Jazeera, CNN)