The Organisation for Economic Co-operation and Development has downgraded its forecasts for economic growth around the world, warning that the US-China trade war is damaging global trade.
The OECD said in its interim report on Thursday that it now expects the world economy to grow by just 2.9% this year, down from 3.8% last year and a forecast of 3.2% in May.
“The global economy is facing increasingly serious headwinds and slow growth is becoming worryingly entrenched,” said OECD chief economist Laurence Boone.
“The uncertainty provoked by the continuing trade tensions has been long-lasting, reducing activity worldwide and jeopardising our economic future.”
The OECD, which represents 36 of the world’s biggest economies, forecast growth would remain weak next year at just 3%. If the 2019 and 2020 predictions for global growth prove true, they would be the weakest annual growth rates since the financial crisis.
Country-specific forecasts were also downgraded across the board. UK growth is forecast at just 1% this year and the OECD warned that a no-deal Brexit “could push the UK into recession in 2020.”
Boone urged governments around the world to start borrowing and spending to boost growth while interest rates around the world remain near record lows.
“Governments need to seize the opportunity afforded by today’s low interest rates to renew investment in infrastructure and promote the economy of the future,” he said.
Boone’s comments echoes a similar call to action from European Central Bank (ECB) chief Mario Draghi. Last week Draghi said eurozone countries with budget surpluses should start spending in a bid to boost flagging growth.
Central banks around the world have been cutting interest rates in recent weeks in a bid to encourage borrowing and spending.
The UK has already announced a major spending programme worth £13.8bn next year. It represents the biggest upgrade to public sector spending in 15 years.
If governments don’t start spending, the OECD warned “global growth could get stuck at persistently low levels.”