OECD cuts outlook for global economy, and Canada's too

The OECD says Canada's economy will grow by less than it did last year, a much worse performance than previously expected.

In a quarterly report on the global economy published Wednesday, the Organization for Economic Co-operation and Development says Canada's economy will grow by about 1.2 per cent this year. That's well down from the modest 1.7 per cent growth thegroup of wealthy nations was expecting as recently as June.

• IMF downgrades Canada's outlook for 2016 and 2017

Canada's isn't the only economy to have hit the brakes. The group says the world economy is only expected to grow by 2.9 per cent in 2016. That's less than the 3.1 per cent growth seen last year, which was generally viewed as a weak year for the world's economy.

Global growth for 2017 is predicted to be 3.2 per cent, down from an earlier forecast of 3.3 per cent.

Trade slowing down

The group blames a general slowdown in international trade for the drop-off, a phenomenon that's radiating out from Asia but impacting economies everywhere.

And the extreme measures being undertaken by some central banks don't seem to be helping either.

• Canada's economy likely shrank in 'abysmal' 2nd quarter

"Exceptionally low and in some cases negative interest rates are distorting financial markets and raising risks across the financial system," the OECD said.

"While weak demand is surely playing a role in the trade slowdown, a lack of political support for trade policies whose benefits could be widely shared is of deep concern," the group's chief economist Catherine Mann said.

• Conference Board downgrades its expectations for Canada

The group singled out the rise of a troubling anti-free trade movement in Western countries, led by isolationist political movements such as the ones that led to the recentBrexit vote and the rise of Donald Trump in the U.S.

The problem, Mann said, is that the downsides of freer global trade (such as factories moving elsewhere) are easy to see whereas the benefits (such as lower prices for products, and more consumer choices) are often harder to see.

"This is not a pretty picture for global growth," Mann said. "Across the board a three per cent growth rate is insufficient to keep promises to citizens."

"Productivity has basically fallen by half since the financial crisis and that is a recipe for breaking promises to all of our citizens," Mann said.