Global economic growth may slow down to 3% in 2022, 2.2% in 2023: OECD

OECD’s latest Interim Economic Outlook report reveals that the global economy has lost momentum in the wake of Russia’s war of aggression in Ukraine, which is dragging down growth and putting additional upward pressure on inflation worldwide.

Annual gross domestic product (GDP) growth is projected to slow to around ½ per cent in the United States in 2023, and 1/4 per cent in the euro area, with risks of deeper declines in several European economies during the winter months. Growth in China has also been hit and is expected to drop to a projected 3.2 per cent in 2022. Except the 2020 pandemic, this will be the lowest growth rate in China since the 1970s.

Inflation is projected to recede gradually through 2023 in most G20 countries as tighter monetary policy takes effect and global growth slows. Headline inflation is projected to ease from 8.2 per cent this year to 6.6 per cent in 2023 in the G20 economies, and fall from 6.2 per cent this year to 4 per cent in 2023 in the G20 advanced economies.

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable, and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD secretary-general Mathias Cormann said during a presentation of the Outlook. “Inflationary pressures that were already present as the global economy emerged from the pandemic have been severely aggravated by the war.”

Economic shocks could reduce growth in the European economies by over 1¼ percentage points in 2023, relative to the Outlook’s central projection, and raise inflation by over 1½ percentage points. This would push many countries into a full year recession in 2023, while GDP growth would also be weakened in 2024, as per a press release by OECD.

Some of the issues highlighted were continued costs from global supply chain pressures, and possible debt crises and financial contagion in many emerging-market and low-income economies.

Further monetary policy tightening will be needed in most major economies to ensure that inflation pressures are reduced durably. This will need to be calibrated carefully given uncertainty about the speed at which higher interest rates will take effect and spill overs from tightening in the rest of the world.

Fibre2Fashion News Desk (NB)