Europe hit hardest in global slowdown -OECD | Popgen Tech


  • Global growth dropped from 3.1% in 2022 to 2.2% in 2023
  • National prospects vary widely, with the UK lagging behind other economies
  • Central banks urged to keep raising interest rates

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

National outlooks vary widely, although Britain’s economy is set to lag behind major peers, the Organization for Economic Co-operation and Development said on Tuesday.

It predicted that world economic growth would slow from 3.1% this year – slightly more than the OECD had forecast in its September projections – to 2.2% next year, before accelerating to 2.7% in 2024.

“We are not predicting a recession, but we are certainly predicting a period of pronounced weakness,” Mathias Cormann, head of the OECD, said at 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 hit business and caused a spike in energy prices.

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

The OECD forecast a contraction of 0.3% next year in regional heavyweight Germany, whose industrial-driven economy is highly dependent on Russian energy exports – less severe than the 0.7% slump expected in September.

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

Even in Europe, outlooks differed, with the French economy, much less dependent on Russian gas and oil, expected to grow by 0.6% next year. Italy posted growth of 0.2%, meaning several quarterly contractions are likely.

Outside the eurozone, the UK economy was seen shrinking 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 graphic

The US economy would hold up better, with growth expected to slow from 1.8% this year to 0.5% in 2023 before picking up 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 was unchanged.

China, which is not an OECD member, was one of the few major economies expected to see growth next year, following a wave of COVID-19 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 eases energy price pressures, inflation across OECD countries has been seen falling from more than 9% this year to 5.1% by 2024.

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

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

Reporting by Leigh Thomas; Editing by Catherine Evans

Our Standards: The Thomson Reuters Trust Principles.


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