HOBBLED by high interest rates, punishing inflation and Russia’s war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.
That was the sobering forecast issued Tuesday, Nov. 22, 2022 by the Paris-based Organization for Economic Cooperation and Development (OECD).
In the OECD’s estimation, the world economy will grow just 3.1 percent this year, down sharply from a robust 5.9 percent in 2021.
Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2 percent.
“It is true we are not predicting a global recession,” OECD Secretary-General Mathias Cormann said at a news conference. “But this is a very, very challenging outlook, and I don’t think that anyone will take great comfort from the projection of 2.2 percent global growth.”
The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses.
Figures from the organization showed fully 18 percent of economic output in member countries being spent on energy after Russia’s invasion of Ukraine helped drive up prices for oil and natural gas. That has confronted the world with an energy crisis on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.
Inflation — largely fueled by high energy prices — “has become broad-based and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support measures that many governments have been rolling out.”
In its latest forecast, OECD predicts that the US Federal Reserve’s aggressive drive to tame inflation with higher interest rates — it’s raised its benchmark rate six times this year, in substantial increments — will grind the US economy to a near-halt. It expects the United States, the world’s largest economy, to grow just 1.8 percent this year (down drastically from 5.9 percent in 2021), 0.5 percent in 2023 and one percent in 2024.
That grim outlook is widely shared. Most economists expect the United States to enter at least a mild recession next year, though the OECD did not specifically predict one.
The report foresees US inflation, though decelerating, to remain well above the Fed’s two percent annual target next year and into 2024.
The OECD’s forecast for the 19 European countries that share the euro currency, which are enduring an energy crisis from Russia’s war, is hardly brighter. The organization expects the eurozone to collectively manage just 0.5 percent growth next year before accelerating slightly to 1.4 percent in 2024. And it expects inflation to continue squeezing the continent: The OECD predicts that consumer prices, which rose just 2.6 percent in 2021, will jump 8.3 percent for all of 2022 and 6.8 percent in 2023.
Growth to come from Asia
Whatever growth the international economy produces next year, the OECD says, will come largely from the emerging market countries of Asia: Together, it estimates, they will account for three-quarters of world growth next year while the US and European economies falter.
India’s economy, for instance, is expected to grow 6.6 percent this year and 5.7 percent next year.
China’s economy, which not long ago boasted double-digit annual growth, will expand just 3.3 percent this year and 4.6 percent in 2023.
The world’s second-biggest economy has been hobbled by weakness in its real estate markets, high debts and draconian zero-Covid policies that have disrupted commerce. (AP)