The OECD improved its global economic growth forecast, citing lower energy and food prices and the easing of China’s anti-Covid restrictions.
Despite easing inflation, the OECD report says Russia’s war against Ukraine continues to overshadow the global economy. Despite recent signs of improvement, the recovery is expected to be moderate over the next two years. The outlook remains fragile, with downside risks dominating.
Global growth slowed to 3.2 percent in 2022, more than 1 percentage point weaker than expected at the end of 2021, mainly as a result of Russia’s war in Ukraine and the related livelihood crisis in many countries.
A key factor in improving sentiment earlier this year was the recent decline in energy and food prices.
Although price levels are still relatively high compared to pre-war levels, the moderation in prices increases the purchasing power of companies and households.
The earlier-than-expected reopening in China is expected to have a positive impact on the world economy as well, reducing pressure in supply chains and boosting international tourism, the OECD report reads.
According to the forecast, the economy of the euro zone will accelerate from this year’s 0.8 percent growth rate to 1.5 percent next year.
- In Germany, the organization predicts a 0.3 percent expansion by 2023, and a 1.7 percent increase by 2024.
- Economic expansion of 0.7 percent this year and 1.3 percent next year is expected in France,
- In Italy, growth of 0.6 percent this year and 1.0 percent next year is likely,
- And in Spain, the OECD expects a 1.7 percent expansion this year and next.
- The US economy is expected to expand by 0.9 percent in 2024 after expanding by 1.5 percent this year.
- China’s economy will expand by 5.3 percent this year and 4.9 percent next year, while
- the Russian economy will shrink by 2.5 percent this year and 0.5 percent next year.
The OECD recommends continuing tight monetary policy, noting that persistent inflationary pressures in services and cost pressures from tight labor markets will require many central banks to keep key interest rates high until next year.
Further interest rate hikes are also needed in the United States and the Eurozone.
The high level of uncertainty caused by war can cause serious damage. Trade tensions are significant and may worsen in the future. Concerns about financial vulnerability have increased. Inflation is forecast to moderate gradually in 2023 and 2024, but will remain above central bank targets in most countries until the second half of 2024. Inflation in the G20 economies is expected to decrease from 8.1 percent in 2022 to 4.5 percent in 2024, according to the OECD report.
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