Trade conflicts and political uncertainty have sparked a global growth slowdown, according to the Organisation for Economic Cooperation and Development's latest economic outlook.
The OECD lowered its forecasts for 2019, saying global GDP would grow 3.5 per cent, down from its previous forecast of 3.7 per cent, and that growth in 2020 would remain at 3.5 per cent.
The think tank said a more severe downturn was unlikely but urged countries to “prepare for any storms ahead” and cooperate on fiscal policy.
It said trade growth and investment was “slackening” on the back of tariff hikes, pointing to the US-China trade war, and warned emerging market economies were experiencing capital outflow and currency weakening.
Chief economist Laurence Boone added it was imperative the UK and the EU maintained the “closest possible relationship” after Brexit.
He said: “There are few indications at present that the slowdown will be more severe than projected.
“But the risks are high enough to raise the alarm and prepare for any storms ahead. Cooperation on fiscal policy at the global and euro level will be needed.”
Low interest rates, particularly in Eurozone countries, and high debt to GDP levels left policymakers with limited room to manoeuvre, the OECD warned.
It called for growth-friendly measures, such as investment in physical and digital infrastructure, and for countries to maintain the capacity for tax and spending policies to stimulate demand if growth weakens sharply.
Secretary general Angel Gurria said: “Trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive.
“We urge policymakers to help restore confidence in the international rules-based trading system and to implement reforms that boost growth and raise living standards – particularly for the most vulnerable.”