The impact of tighter monetary policy is becoming increasingly visible, business and consumer confidence have turned down, and the rebound in China has faded, it said.

Global gross domestic product (GDP) growth is projected to remain sub-par both this year and next year, at 3 per cent and 2.7 per cent respectively, held back by the macroeconomic policy tightening needed to rein in inflation, the document noted.

Annual US GDP growth is expected to slow from 2.2 per cent this year to 1.3 per cent in 2024, as tighter financial conditions moderate demand pressures.

GDP growth is projected to ease to 0.6 per cent this year in the euro area, where demand is already subdued, and edge up to 1.1 per cent next year as the adverse impact of high inflation on real incomes fades.

Growth in China is expected to be held back by subdued domestic demand and structural stresses in property markets, easing to 5.1 per cent this year and 4.6 per cent in the next.

Global headline inflation is declining, but core inflation remains persistent in many economies, held up by cost pressures and high margins in some sectors.

Inflation is projected to moderate gradually over 2023 and 2024, but to remain above central bank objectives in most economies.

Headline inflation in the G20 economies is projected to ease to 6 per cent this year and 4.8 per cent in the next, with core inflation in the G20 advanced economies declining from 4.3 per cent this year to 2.8 per cent in 2024.

Risks remain tilted to the downside. Uncertainty about the strength and speed of monetary policy transmission and the persistence of inflation are key concerns, the OECD document commented.

The adverse effects of higher interest rates could prove stronger than expected, and greater inflation persistence would require additional policy tightening that might expose financial vulnerabilities, it said.

A sharper-than-expected slowdown in China is an additional key risk that would hit output growth around the world.

Governments are faced with mounting fiscal pressures from rising debt burdens and additional spending on ageing populations, the climate transition and defence.

Enhanced near-term efforts to rebuild fiscal space and credible medium-term fiscal plans are needed to better align near-term macroeconomic policies and help ensure debt sustainability, the document added.

Fibre2Fashion News Desk (DS)