Daily Management Review

OECD Issues New Warning On Risks To Global Growth


OECD Issues New Warning On Risks To Global Growth
The threats to the growth of the global economy have increased, said a report by a leading international economic organization.
The prospects of global growth have decreased steadily said a new report by the Organisation for Economic Cooperation and Development - the OECD. While forecasting that the anticipated global growth will be in the region of about 3 per cent, the report also said in the same breath that the risks have also increased. Business investment is being held back because of a lack of direction on climate policy, the report said.
And even while the report by the OECD does not predict any global recession, its forecast is certainly downbeat.
Some of the challenges have both long term and more immediate consequences and calls for the governments to take action to address them have been made.
The most striking example is climate change.
There can be long lasting damage on capital and land and disruption of economic activity because of extreme weather events, the OECD report said. There can also be disorderly migration flows because of such events, the report said.
The frequency of such events could get increased because of insufficient policy action.
While the OECD says that this challenge certainly needs a long term solution by the governments, the impact of these extreme weather events can already be seen to having an impact on business investment.
Weakening economic performance in many countries has primarily been because of investment and trade issues. The OECD urged quick actions form the governments.
"Without a clear sense of direction on carbon prices, standards and regulation, and without the necessary public investment, businesses will put off investment decisions, with dire consequences for growth and employment," the OECD says.
A marked acceleration of investment by business would be triggered if there is more clarity on climate policy - and also on digitalization, the report argued. In order to make investments in the affected areas, the OECD suggested the creation of national funds.
The change in the Chinese economy – the transformation from a manufacturing one to a service oriented one, was another of the challenges that the OECD mentioned in the report. For china and the rest of the world, this change means that there will likely not be as strong a growth in demand in the future by the industries in China for imported goods for its industries to process. 
Additionally, a gradual slowdown in the rate of growth since the start of the decade has also been pointed out as an issue for the Chinese economy in addition to the shift in the shape of the country’s economy. The Chinese government has accepted that the rate at which the economy of the country had grown in the last three decades will no longer be achievable on s sustainable basis.
The OECD also identified as a risk to the global economic growth is the knowledge that efforts are being made by the Chinese authorities to ensure that it does not become too abrupt a slowdown and the possibility that it might not succeed in this effort.