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Potential trade war threatens global economic growth, OECD warns

13 March 2018

"Backed by the global trade recovery, minimum wage hike, and household income expansion, South Korea's economic growth will remain at 3 percent in 2018-2019", the OECD report said, retaining its former forecast for Asia's fourth-largest economy.

"Stronger investment, the rebound in global trade and higher employment are helping to make the recovery increasingly broad-based".

However, the report also warned that "an escalation of trade tensions is a serious risk" following Trump's decision to introduce tariffs on steel and aluminium imports.

U.S. President Donald Trump last week formally signed proclamations to impose a 25-percent tariff on imported steel and a 10-percent tariff on aluminum, causing mounting dissent among business groups and trading partners around the world. "Certainly we believe this is a significant risk, so we hope that it doesn't materialize because it would be fairly damaging", Pereira said.

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Container ships are seen at a loading terminal at the Elbe river in the harbour in Hamburg, Germany, February 6, 2017.

However, the growth rate is still very slow compared to other G20 nations, and well below the average for the group, which is expected at 4.1% in 2018 and 4.0% in 2019.

The OECD blamed the UK's position on high inflation dampening consumer demand and continued uncertainty about Brexit.

The body forecasts growth will slump to 1.2 per cent over the course of this year and 1.1 per cent in 2019, as the United Kingdom leaves the EU.

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Last week, Stats SA reported higher than expected GDP growth for South Africa in 2017, showing that the economy grew by 1.3%, exceeding National Treasury's expectation of 1.0%. Previously, the OECD had forecast growth of 2.1 percent and 1.9 percent respectively.

In its interim economic outlook report issued Tuesday, the organization forecast global economic growth for this year at 3.9 percent, up from its previous suggestion of 3.7 percent.

The Paris-based organisation said the world economy was on course to expand at an annual pace of 3.9% over the next two years.

With the euro area economy resilient, rising inflation would allow the European Central Bank to reduce its bond purchases gradually this year and subsequently phase out its negative interest rate policy, the OECD said.

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Potential trade war threatens global economic growth, OECD warns