Organisation for Economic Co-operation and Development
The global economy will expand by a record next year due to central bank interest rate hikes, but growth will be modest, the Organization for Economic Co-operation and Development said on Wednesday,
The expectations are part of a slight revision to the group’s economic forecast for 2023.
In its latest report, the group forecast that the global economy will grow 2.7% this year, up from a 2.6% forecast in March.
The Paris-based group added that despite the lifting of anti-coronavirus restrictions in China, economic growth would hit its slowest annual rate since the global financial crisis of 2008 and 2009, except in 2020, which was hit hard Affected by the epidemic.
Growth will accelerate only slightly to 2.9 percent next year, unchanged from its March forecast, starting with the housing market, the OECD said, given the growing impact of major central bank rate hikes over the past year on private investment.
“The global economy is at a turning point,” said Claire Lombardelli, the group’s newly appointed chief economist.
The global economy is benefiting from stagnant inflation after indicators rose last year due to the impact of the war in Ukraine on energy and food prices, according to the group’s report.
Inflation in the euro zone, for example, slowed markedly in May to an annual rate of 6.1%, and in the US it hit 4.4% in April, well below 2022 levels.
According to the report, the slowdown means the central bank can limit interest rate rises, which bodes well for households and companies getting credit, spending and growth.
The recent recovery in Chinese economic activity following a strict zero-Covid policy is enough to revive the global economy, according to the group, which expects Chinese growth to hit 5.4% this year, up 0.1 percentage points from its March forecast, and 5.1% next year. .
the road is long
The Organization for Economic Co-operation and Development expects the Eurozone economy to grow by 0.9% this year, a slight upward revision of 0.1 percentage point, after reassessing Italy’s GDP growth at 1.2%.
Suppose France grows at 0.8% and Germany at zero.
Britain is likely to grow by 0.3% this year, while the Organization for Co-operation and Development is forecasting a recession.
Outside of Europe, US GDP is projected to grow by 1.6% and India by 6%.
Among the challenges cited by the group was the persistence of “persistently high” non-energy and food inflation, Lombardelli said, calling for the central bank to “maintain tight monetary policy until there are clear signs of a decline.”
However, high interest rates prevent the global economy from growing more appreciably by reducing the allocation of credit and encouraging saving rather than consumption.
“Deficits and debt are higher in almost all countries than before the pandemic, and many face increasing pressures on public spending related to aging populations, climate change and debt cost burdens,” the report states.
In turn, the World Bank in its latest report, Global Economic Prospects, raised its forecast for global economic growth this year to 2.1% from the 1.7% forecast it released in January, compared to 3.1% for the economy in 2021.
The bank also revised its forecast for the global economy in 2024 to 2.4%, compared with its previous forecast of 2.7% in January.
The World Bank said in the report that global economic growth has slowed sharply, global interest rates have risen, and the risk of financial stress in emerging markets and developing economies has intensified.