According to FXTM, the latest OECD report on the global economy was released this morning. Of particular note, the OECD view that a no-deal Brexit would take 3% away from UK GDP over the next three years in comparison to 0.6% for the rest of the EU.
The United States economy will continue to expand at the fastest pace among developed nations, however, its own pace of GDP growth will slow from 2.4% to 2% in 2020.
Perhaps the biggest headline coming out of the report is that the OECD see world growth rising by only 2.9% in 2019, with this representing the lowest rate of global GDP growth since 2009.
2019 growth projections for Mexico, Argentina, Brazil, India, Russia, Saudi Arabia and South Africa were also downgraded.
The ongoing tit-for-tat tariff war between the world’s two largest economies could reduce global GDP growth by between 0.3 and 0.4 percentage points in 2020, and between 0.2 and 0.3 points in 2021, according to the report.
AMEinfo asked Han Tan | MARKET ANALYST-FXTM:
1- What is the impact of a 3% GDP loss for the UK on the Pound sterling, and trade with the Arab world?
Tan: The OECD’s latest report confirms fears over the economic ramifications from a no-deal Brexit. Should the UK indeed crash out of the EU without a deal, such a worst-case scenario could well send the Pound hurtling towards 1.15 against the US Dollar.
Faced with the prospects of slower growth, and possibly a recession in 2020 for the UK economy, such a dismal outlook will only serve to dampen external trade and corporate activities, while potentially causing the UK to become less attractive as a destination for top talent. However, a UN report earlier this year stated that GCC members could stand to benefit from Brexit, as the UK searches for new import sources.\
Hussein Sayed, Chief Market Strategist at FXTM, will comment on the Fed interest rate cut and expected rate adjustments moving forward.
2- Global growth: Is this a definite sign of a recession?
Tan: Despite the downward revisions to global growth, the OECD is still forecasting the worldwide economy to expand by 3% in 2020, which is 0.1 percentage points faster compared to this year’s 2.9%. The threat of a recession appears limited to a select few countries, should the confluence of downside risks crystalize and policymakers fail to trigger enough support measures to offset the downside risks.