OECD forecast: High rates, inflation to slow world growth

It has been rocked by high interest rates, punishing inflation and Russia’s war on Ukraine.The global economy has seen modest growth this year and is expected to expand more rapidly in 2023.

That’s the dire forecast released Tuesday by the Paris-based Organization for Economic Co-operation and Development. According to the OECD, the world economy will grow. Just 3.1% this year, down significantly from 5.9% in 2021.

Next year, the OECD predicts worse: the international economy will grow by just 2.2%.

“It is true that we cannot predict a global recession,” OECD Secretary-General Mathias Cormann told a news conference. “But this is a very difficult outlook and I don’t think anyone will take comfort from the forecast of 2.2 percent global growth.”

Composed of 38 member countries, the OECD works to promote international trade and prosperity and publishes periodic reports and analyses. In its latest estimate, The organization speculates that this is due to the US Federal Reserve’s aggressive push to control inflation. With high interest rates — its benchmark has been raised six times this year. increased significantly, It would bring the American economy to a near standstill. The United States, the world’s largest economy, will grow by 1.8% this year (down sharply from 5.9% in 2021); It is forecast to grow by 0.5% in 2023 and only 1% in 2024.

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That pessimistic view is widely shared. Most economists expect the United States to enter at least a mild recession. Next year, the OECD can’t predict exactly.

US inflation is slowing, but the report predicted.to stay well above the Fed’s 2% annual target next year and through 2024.

OECD estimates for the 19 European countries that share the euro currency are facing an energy crisis caused by war with Russia., As bright as it is. The organization expects the euro zone to collectively manage growth of just 0.5%. Accelerate slightly to 1.4% next year in 2024.

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And inflation is expected to continue to squeeze the continent.: OECD estimates of consumer prices.which rose only 2.6% in 2021; It will jump to 8.3% for all of 2022 and 6.8% in 2023.

Regardless of international economic growth next year, the OECD predicts that most of it will come from emerging markets in Asia. They are expected to account for three-quarters of global growth next year. Economy of Indiafor example, It is expected to grow by 6.6% this year and 5.7% next year.

Chinese economywhich recently boasted double-digit annual growth; It will only increase by 3.3% this year and 4.6% in 2023. The world’s second largest economy is weak in its real estate market; Shocked by high debt and overly harsh COVID-19 policies. It disrupts trade.

The global economy rose from the pandemic crisis in the early 2020s thanks to massive government spending and record low borrowing rates. The recovery has been very strong, and factories, Overwhelming ports and freight yards, shortages and high prices. In February, Moscow invaded Ukraine, disrupting energy trade. Food and prices are getting faster..

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the consequences of chronically high inflation after decades of low prices and very low interest rates; And interest rates are unpredictable.

“Monetary strategies adopted during long periods of low interest rates are rapidly rising and may be exposed to stress in unexpected ways,” the OECD said in a report on Tuesday.

The interest rate is higher. Indebted governments engineered by the Fed and other central banks; It will make it harder for businesses and consumers to pay their bills. Especially the US dollar is strongIf it comes in part from higher U.S. rates, it will disrupt foreign companies. They may lack the means to repay their now-undervalued debts borrowed in US currency.

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