The think tank – Organization for Economic Co-operation and Development (OECD) believes that expansion of global growth “may have peaked”.
The think tank predicted that the global economy would achieve a growth rate of 3.7 per cent in both 2018 and 2019, the OCED noted in its latest interim outlook released Thursday. This level of growth in just below the global growth rate as was noted just before the global financial crisis about a decade ago.
The world economy as a whole is nearing a plateau in terms of growth and the OCED also noted proof of enhanced deviation between different economies, said Laurence Boone, the recently appointed chief economist of the OECD.
The four main risks according to Boone that would impede global growth included increased protectionists policies, vulnerability of the emerging markets, geo-politics and finance.
The report from the OECD has suggested various central banks that they should apply a gradual normalization of monetary policy but also noted that the degree of normalization should be different for different countries.
The emerging markets are being dragged by a rising dollar which in turn is the result of the normalization polices being undertaken in the United States, Boone said in a television interview.
“That obviously has an impact on how investors look at their funds and they are starting to repatriate from emerging markets to the U.S. economy,” she added.
Boone however said that most of the emerging market in the world were mostly insulated from the risk of the global factors as well as the US monetary policy with the possible exception of Turkey and Argentina.
Talking about China and the trade war with the United States, Boone opined that the country and its economy is being impacted in “more or less in the same way” by the international trade tariffs primarily because the country had already ensured that some parts of its economy is no more dependent on exports as it was earlier.
While saying that Brexit was amongst the most important sources of uncertainty in the current global economic scenario, Boone added that it was “vital” that the UK and the EU come to an agreement on the exit of Britain from the block in a manner that the two parties are able to maintain a close relationship with each other.
UK is set to formally leave the EU in March next year and there are a number of issues that are still unresolved between the two sides which include the type of trading and arrangement for customs clearance that would be put into after UK exits the EU.
The OECD also suggested to keep an eye out for Italy because the country has a slow rate of growth but at the same time has high levels of corporate and public debt.
(Adapted from CNBC.com)