Global economic watchdog says growth is past its peak and faces risks from trade disputes and higher interest rates.

The global economy has passed its peak and faces a slowdown driven by trade disputes and higher interest rates, according to a global economic watchdog.

The Organisation for Economic Cooperation and Development (OECD), which advises many of the world’s richest economies, on Wednesday said it has cut its 2019 global growth forecast to 3.5 percent from 3.7 percent as predicted earlier.

The OECD also warned that if the United States were to hike tariffs to 25 percent on all Chinese imports, as Trump has threatened, the world economic growth could fall to close to 3 percent in 2020.

US President Donald Trump slapped tariffs on many trade partners and escalated a tit-for-tat dispute with China.

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The growth slowdown is expected to be worst in non-OECD countries, with many emerging-market economies likely to see capital outflows as the US Federal Reserve gradually raises interest rates.

The OECD cut its outlook for countries at risk such as Brazil, Russia, Turkey and South Africa.

“We’re returning to the long-term trend. We’re not expecting a hard landing, however, there’s a lot of risks. A soft landing is always difficult,” OECD chief economist Laurence Boone told Reuters news agency.

Global slowdown

The Paris-based agency said that while labour markets are in good health in major economies like the US, trade and investment have taken a hit from higher tariffs.

“Trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive,” OECD chief Angel Gurria said.

A full-blown trade war and the resulting economic uncertainty could knock as much as 0.8 percent off global gross domestic product by 2021, the OECD estimated.

US President Donald Trump imposed tariffs on China in September [File: Reuters]

Trimming China’s forecast, OECD said its growth would slow from 6.6 percent to a 30-year low of 6.0 percent in 2020 in the face of higher US tariffs.

It warned that “a much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence”.

Though at the source of the current tensions, the US economy was expected to fare better than most other major economies.

The OECD’s 2018 and 2019 forecast for the US remained unchanged. It said growth in the world’s biggest economy would slow from nearly 3.0 percent this year to slightly more than 2.0 percent in 2020.

In Britain, the OECD forecast growth would pick up from 1.3 percent this year to 1.4 percent in 2019.