OECD forecast sees global growth at decade low

Organization for Economic Cooperation and Development
Updated 22 November 2019

OECD forecast sees global growth at decade low

  • Governments failing to get to grips with challenges, outlook says

PARIS: The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said on Thursday in an update of its forecasts.

The world economy is projected to grow by a decade-low 2.9 percent this year and next, the Organization for Economic Cooperation and Development said in its Economic Outlook, trimming its 2020 forecast from an estimate of 3 percent in September.

Offering meagre consolation, the Paris-based policy forum forecast growth would edge up to 3 percent in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained.

A bigger concern, however, is that governments are failing to get to grips with global challenges such as climate change, the digitalization of their economies and the crumbling of the multilateral order that emerged after the fall of Communism.

“It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary or fiscal policy: they are structural,” OECD chief economist Laurence Boone wrote in the report.

Without clear policy direction on these issues, “uncertainty will continue to loom high, damaging growth prospects,” she added.

Among the major economies, US growth was forecast at 2.3 percent this year, trimmed from 2.4 percent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among US trading partners.

With the world’s biggest economy seen growing 2 percent in 2020 and 2021, the OECD said further interest rate cuts would be warranted only if growth turned weaker.

China, which is not an OECD member but is tracked by it, was forecast to grow marginally faster in 2019 than had been expected in September, with growth of 6.2 percent rather than 6.1 percent.

However, the OECD said that China would keep losing momentum, with growth of 5.7 percent expected in 2020 and 5.5 percent in 2021 in the face of trade tensions and a gradual rebalancing of activity away from exports to the domestic economy.

In the euro area, growth was seen at 1.2 percent in 2019 and 1.1 percent in 2020, up both years by 0.1 percentage point on the September forecast. It is seen at 1.2 percent in 2021.

The OECD warned that the relaunch of bond buying at the European Central Bank would have a limited impact if euro area countries did not boost investment.

The outlook for Britain improved marginally from September as the prospect of a no-deal exit from the EU recedes.

British growth was upgraded to 1.2 percent this year from 1 percent previously and was seen at 1 percent in 2020.


Saudi business chiefs back 2020 budget

Updated 11 December 2019

Saudi business chiefs back 2020 budget

  • 2020 spending plan hailed as a positive driver in boosting country’s economy

RIYADH: Saudi businesses have welcomed spending plans of SR1.02 trillion ($272 billion) next year, announced by King Salman.

The Council of Saudi Chambers praised the efforts of the monarch, Crown Prince Mohammed bin Salman and others in reaching an agreement on the 2020 budget.

The government has predicted revenues of SR833 billion and a deficit of SR187 billion for next year, considered an indicator of the success of the Kingdom’s economic policies amid a bleak global economic backdrop.

Chairman of the Council of Saudi Chambers Dr. Sami Abdullah Al-Abaidi said that the Saudi business sector was optimistic about the new spending plans.

“These figures reflect the effective impact of the economic reform measures, the economy’s restructuring and diversification of sources of income,” he added.

Al-Abaidi praised the king and the crown prince for supporting the Saudi economy through numerous projects and initiatives aimed at boosting the business sector.

He said the most notable were business performance improvement initiatives, privatization, private-sector stimulation and local promotion programs.

“This has paved the way for the Kingdom to get the best international classifications, including its first world ranking in business environment reforms, which made it a hub for investments,” Al-Abaidi added.

The business chief reiterated King Salman’s determination to continue implementing reforms, diversifying sources of income, making optimal use of resources, empowering the private sector, and improving transparency and efficiency in government spending to boost growth rates.

“These trends are one of the most important requirements for achieving the Kingdom’s Vision 2030,” he said.

The council’s vice chairman, Muneer bin Saad, said the budget for the new year focused on investing in the human element and sectors that directly affected the lives of citizens, including the development of services.

Saad added the monarch had directed to extend the disbursement of the cost of living allowance until the end of 2020.

Council member Abdullah Al-Odaim said the budget met the expectations of Saudi citizens, and strengthened the confidence of international investors, as figures showed the determination of the state to move forward in its policies to raise the efficiency of government spending.

They also showed increases in non-oil revenues, projected to grow more in light of the improvement of economic activity.

The delegated secretary-general of the Council of Saudi Chambers, Hussain Al-Abdulqader, said the Saudi business sector welcomed the budget which through
its projects and programs would help improve investment opportunities as well as the Saudi economy, ultimately strengthening the Kingdom’s global economic standing.