“World growth is at half mast”: serious OECD forecast on the global economy between inflation and war

World economic growth is slowdown due to inflationthe Organization for Economic Co-operation and Development (OECD) said in its latest forecast on Tuesday, calling for new interest rate hikes and more government aid to fight the price increase.

According to its latest projections, the growth of the world Gross Domestic Product (GDP). expected to reach 3.1% this year, just over half of last year’s 5.9%.

The decline will continue next year, with a growth that will stabilize at 2.2%, before climbing to 2.7% in 2024, according to the organization’s forecasts.

In this way, the OECD raises its projection for 2022 slightly compared to the September data, while leaving the projection for next year unchanged.

War and its impact on inflation

“End of the war and a just peace in Ukraine would be the most effective means of doing this improve the global economic outlook“OECD Secretary-General Mathias Cormann told a press conference.

“Growth is at half mast, high inflation is persistenttrust has eroded and uncertainty is high,” says the OECD, which brings together 38 states, the majority of which are developed countries but also some emerging markets.

“The world economy is experiencing its energy crisis worst since the 1970s“, according to OECD Acting Chief Economist Álvaro Santos Pereira.

“The the energy shock has brought inflation to unprecedented levels over several decades and is depressing growth worldwide,” said the economist.

According to the organization’s projections, the price increase will reach 8% in the fourth quarter of this year G20 countrieswhich includes the main world economies, before returning to 5.5% in 2023 and 2024.

On the bright side, some inflationary pressures eased last year after supply chains, disrupted during the covid-19 pandemic, were restored, while shipping costs fell.

Santos Pereira says the most likely scenario projected by the OECD “is not a global recession, but a sharp slowdown of the world economy in 2023with inflation still high but declining in many countries”.

To overcome the crisis, the OECD calls “A further tightening of monetary policy to fight inflation”, while stating that “fiscal aid must be more specific and temporary”.

“Supports often need to be better tailored to ensure they are only temporary and targeted at the most vulnerable households and businesses, and maintain incentives to reduce energy consumption.”

“Accelerate investment to adopt and develop sources e clean energy technologies it will be essential to diversify energy supplies and ensure energy security,” says Santos Pereira.

Furthermore, the consequences of the war in Ukraine, which began at the end of February, “remain a threat to world food security, especially when combined with new extreme weather events derived from climate change,” says the organization.

In Latin America, the OECD acknowledges that the region’s major economies “performed better than expected in 2022, especially those that export food and energy.”

But, at the same time, he expects this rebound”lose strength during 2023 and 2024“due to the tightening of global and domestic financial conditions”, the end of the fiscal aid still in force and “less sustained raw material prices”.

In Brazil, GDP growth of 2.8% is expected in 2022. The OECD forecasts positive growth again this year for Chile (1.9%), Mexico (2.5%), Colombia (8.1%) and Argentina (4.4%), among others.

By Boris Cambreleng – AFP Agency