Global economy to slow down in 2023, may grow 3.1 per cent this year: OECD

On Tuesday, the Paris-based Organization for Economic Cooperation and Development (OECD) released its latest forecast on the global economy and projected just a 3.1 per cent growth for 2022, a sharp decline from the 5.9 per cent witnessed last year. The report comes amid mounting challenges including the worst energy crisis since the 1970s, the Russian invasion of Ukraine, pushing inflation, high-interest rates and so on. 

While the 38-member country organisation is not predicting a global recession for the upcoming year, the energy crisis may trigger a sharp downturn. “It is true we are not predicting a global recession…but this a very, very challenging outlook”, said the OECD Secretary-General Mathias Cormann during a press conference. This is reflected in the recent forecast by the organisation which estimates that the international economy would expand only 2.2 per cent in 2023.

A statement by the OECD has attributed this slowdown to aspects like, “Persistent inflation, high energy prices, weak real household income growth, falling confidence and tighter financial conditions are all expected to curtail growth.” 

According to Cormann, an end to the conflict in Ukraine is the best way to improve the global economic outlook. This comes after the statement said, considering the “fragile prospects” for the global economy are a direct result of the Russian invasion of Kyiv which in turn led to the energy crisis and soaring inflation that most countries are witnessing currently.  

Meanwhile, economies like the 19 countries in the eurozone that are worst affected by the conflict are projected to grow by 3.3 per cent this year and might worsen in FY 2023-24 with an estimated growth of 0.5 per cent. Meanwhile, the United States may grow by 1.8 per cent this year and is also expected to grow by 0.5 per cent next year. 

The OECD also expects inflation in advanced economies to remain above nine per cent and estimated that it might go down to 6.6 per cent in 2023. Speaking about the European and American economies Cormann told the reporters that they are growing partly due to the government’s increased spending on energy subsidies as well as policies aimed at boosting investment. 

The inflation has also become persistent and broad-based, said the 38-member nation organisation. Additionally, it also warned that the US Federal Reserve’s constant increase in interest rates to tame the soaring inflation in the country could bring Washington’s economy to a near-halt. 

In the upcoming year, growth will be “strongly dependent” on major Asian economies including India which is projected to have the world’s second-highest growth rate this year, after Saudi Arabia with a 6.6 per cent but may face a slowdown next year with an estimated 5.7 per cent growth. Meanwhile, China is projected to grow just 3.3 per cent in 2022 and 4.6 per cent next year. 

(With inputs from agencies) 

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