Europe will bear the brunt of global slowdown: OECD

  • Global growth is expected to fall from 3.1% in 2022 to 2.2% in 2023
  • National prospects vary widely, with the UK trailing other economies
  • Central banks are urged to continue raising interest rates

PARIS, Nov 22 (Reuters) – The world economy should avoid a recession next year, but the worst energy crisis since the 1970s will cause a sharp slowdown, with Europe hardest hit, the OECD said, adding that fighting inflation should be the top priority of politicians. .

National prospects vary widely, although the British economy lags behind its major peers, the Organization for Economic Co-operation and Development said on Tuesday.

He forecast global economic growth would slow from 3.1% this year, slightly more than expected by the OECD in its September projections, to 2.2% next year, before accelerating to 2.7% in 2024. .

“We are not forecasting a recession, but we are certainly forecasting a period of pronounced weakness,” OECD chief Mathias Cormann told a news conference to present the organization’s latest Economic Outlook.

The OECD said the global slowdown was hitting economies unevenly, with Europe bearing the brunt as Russia’s war in Ukraine hurts business activity and causes energy prices to rise.

He forecast the economy of the 19-country euro zone would grow 3.3% this year and then slow to 0.5% in 2023 before recovering to expand 1.4% in 2024. That was slightly better than in the OECD’s September outlook, when it estimated growth of 3.1%. this year and 0.3% in 2023.

The OECD forecast a 0.3% contraction next year in regional heavyweight Germany, whose industry-driven economy relies heavily on Russian energy exports, less severe than the 0.7% drop expected in September.

A view shows the skyline of Frankfurt, Germany, July 5, 2022. REUTERS/Kai Pfaffenbach/File Photo

Even in Europe, the outlook diverged as the French economy, much less dependent on Russian oil and gas, is expected to grow 0.6% next year. Italy was expected to post 0.2% growth, meaning several quarterly contractions are likely.

Outside the euro zone, the UK economy is forecast to contract by 0.4% next year as it grapples with rising interest rates, rising inflation and weak confidence. Previously, the OECD had expected growth of 0.2%.

Reuters charts

The US economy was expected to hold up better, with growth expected to slow from 1.8% this year to 0.5% in 2023 before rising to 1.0% in 2024. The OECD had previously expected growth of just 1.5% this year in the world’s largest economy. and its estimate for 2023 remained unchanged.

China, which is not an OECD member, was one of the few major economies expected to pick up growth next year, after a wave of COVID lockdowns. Growth was seen rising from 3.3% this year to 4.6% in 2023 and 4.1% in 2024, compared to previous forecasts of 3.2% in 2022 and 4.7% for 2023 .

As tighter monetary policy takes effect and pressures on energy prices ease, inflation in OECD countries is projected to fall from over 9% this year to 5.1% by 2024.

“On monetary policy, further tightening is needed in most advanced economies and many emerging market economies to firmly anchor inflation expectations,” Cormann said.

While many governments had already spent heavily to ease the pain of high inflation with energy price caps, tax cuts and subsidies, the OECD said the high cost meant such support would have to be better targeted in the future.

Reporting by Leigh Thomas; Edited by Catherine Evans

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