OECD: Trade disputes to hamper global growth: Trade tensions have caused a global economic slowdown in the past year and threaten future growth, according to a report released yesterday by the Organization for Economic Cooperation and Development (OECD). Trade growth is predicted to weaken to around 2%, its lowest rate since the global financial crisis. Meanwhile, global GDP is predicted to fall to 3.2% this year from 3.5% in 2018, before rising to 3.4% in 2020.

Where are the biggest threats to investment? Prolonged trade restrictions between the US and China, weak capital goods production in the major OECD economies, policy uncertainty, shortages in skills, and poor infrastructure are all hindering global investment. The report estimates that business investment will fall as a result, growing at an average rate of only 1.75% in 2019 and 2020, compared to 3.5% in 2017 and 2018. Continued trade policy uncertainty is one major risk to investment, which in turn impacts jobs and living standards. In particular, the possibility that the US might impose restrictions in specific trade-sensitive sectors, such as the automobile industry, is sending ripples of anxiety to Europe and throughout the world, because of its potential impact on the value chain.

How are emerging markets faring? Financial conditions have stabilized for emerging markets, the report says, but we remain vulnerable to a decreasing risk appetite among investors. Policy recommendations from the OECD vary from economy to economy. Monetary policy tightening to retain investor confidence is recommended for Argentina and Turkey, where concerns persist about the sustainability of fiscal positions and the health of the banking sector. India and Mexico, however, have more scope for easing monetary policy as inflation declines, due to their flexible exchange rates and lower exposures to foreign currency-denominated debt.