The world economy is slowing, and it could be headed toward a recession.
The Organization of Economic Co-Operation and Development, an intergovernmental economic group, just slashed its forecast for global growth to a decade low.
The OECD projects the world economy will grow just 2.9% in 2019, which would be the lowest forecast since 2009. In 2020, growth is predicted to inch up to 3%. Just 18 months ago, the organization still expected 4% growth.
Global growth at 3% or less constitutes a recession, according to past definitions used by the International Monetary Fund.
The G20 nations are expected to grow 3.1% this year and 3.2% next year, as per the updated outlook. US growth was cut to 2.4% in 2019 and 2% in the following year.
The US-China trade war and its impact on global manufacturing and trade growth are to blame for this bleak forecast, according to the OECD. Brexit also remains a big question mark, and the slowdown of China’s massive economy presents its own set of challenges for the world.
The ongoing trade tensions are also weighing on business investments and confidence, which just adds to the uncertainty. The sluggish business investment has created an investment gap that will have a long-term and structural impact on growth, according to OECD chief economist Laurence Boone. This could mean slower growth becomes the new normal.
“An urgent response is required, failing which we run the risk of finding ourselves stuck in a long period of growth, the brunt of which will be felt primarily by the most vulnerable,” said Boone in a blog post.