The Times Edward Curwen
The stagnation has China “at its heart” with the OECD saying the world’s second-biggest economy is moving from being the world’s workshop – with high demand for commodities to build infrastructure and fuel manufacturing, to a consumption and services based economy more akin to Europe and the US.
Catherine Mann, its chief economist, said: “Global trade, which was already growing relatively slowly over the past few years, appears to have stagnated and even declined since late 2014.
“This is deeply concerning. Robust trade and global growth go hand in hand … World trade has been a bellwether for global output. The growth rates of global trade observed so far in 2015 have, in the past, been associated with global recession.”
OECD forecasts show worldwide trade growth down to 2 per cent this year, down from 3.4 per cent last year. It predicted global GDP growth would be 2.9 per cent in 2015, lower than the 3.3 per cent seen last year.
It has been forced to cut repeatedly its 2015 forecasts, which proved too high. Last November it said global GDP growth this year would be 3.7 per cent. Its latest forecasts, published today, suggest growth will accelerate again next year, rising to 3.6 per cent year-on-year but not until 2017.
Brazil, China, Russia and Australia have all been hit by a fall in commodity prices. In the last year the price of iron ore is down 37 per cent, copper is down 24 per cent and oil and natural gas are both down more than 40 per cent.
Both Brazil and Russia are in recession, with trade sanctions imposed by the US and European Union and the low oil price sending Russia into reverse. Its economy will contract by 4 per cent this year, the forecasts said, whilst Brazil’s economy will shrink by 3.1 per cent.
The UK has fallen back slightly too, with growth of 2.4 per cent forecast for 2015, in line with the United States. Strong jobs figures on Friday sparked speculation that the “lift-off” in US interest rates could still come this year. The US Federal Reserve could decide to raise rates at its December meeting.
Ms Mann said that though there were risks to growth the actions of governments and central banks across the world – particularly in China – were helping steer a path away from crisis. She said for now the OECD was predicting a “modest revival” in both trade and global economic growth.
“Policy actions should help to put a floor under global commodity prices and stabilise commodity-exporting economies,” she added.
China’s President Xi Jinping has indicated he wants the country to maintain annual growth of 6.5 per cent over the next five years to ensure it hits its target of doubling the size of its economy between 2010 and 2020. Official figures from Beijing showed it had slowed to 5.9 per cent, a figure many analysts believe remains overly optimistic.
Ms Mann, who joined the OECD last year, used its bi-annual forecasts to say that if political obstacles can be removed the mass migration to Europe can provide an economic boost to host countries.
She said: “Given the right policies, asylum-seekers need not impose an unmanageable economic burden. Indeed, if the refugees who stay are rapidly integrated into European society, they are likely to benefit the host countries.”