OECD: Expect Global Growth Slowdown with ‘Persistent’ High Inflation

Paris-based Organisation for Economic Cooperation and Development (OECD) said on Tuesday that world growth is set to slow down from 3.1% this year to 2.2% next year due to high inflation.

In OECD’s latest forecasts, the effects of Russia’s war in Ukraine have affected the global growth momentum, “high inflation is proving persistent, confidence has weakened, and uncertainty is high.” 

OECD chief economist Alvaro Santos Pereira said the global economy was “reeling from the largest energy crisis since the 1970s”.

He added that the energy shock has pushed inflation up “to levels not seen for many decades” and is hitting economic growth around the world.

Even before the conflict, inflation had already been rising due to bottlenecks in the global supply chain as countries recovered from Covid lockdowns.

According to OECD, inflation was set to reach 8% in the fourth quarter of this year in the Group of 20 top economies, falling to 5.5% in 2023 and 2024.

Santos Pereira said that the forecast for the world economy in 2023 “is not a global recession but a significant growth slowdown, as well as still high, albeit declining, inflation in many countries.”

OECD recommends that fighting inflation become a “top policy priority” as price hikes weaken people’s purchasing power worldwide. Countries, where price rises remained high, should tighten monetary policy and target support measures for families and firms to lessen the impact of inflation, with energy costs “likely to remain high and volatile for some time.”

In addition, OECD called for a faster response in investing and adopting clean energy sources and technology to help diversify supply.

Gas and oil shipping from Russia has been severely disrupted following the invasion of Ukraine. Western allies sanctioned its energy exports and saw supplies slashed over the conflict. 

This upset on supply sent energy costs spiraling and caused decades-high inflation in major economies, leading central banks to increase interest rates in a bid to control runaway prices.

Source: ABS-CBN News