The global economy was stronger than expected in the first half of 2023, but the growth outlook is weak, inflation is proving persistent and there are significant downside risks, according to the OECD’s latest Interim Economic Outlook.
The outlook now is for three per cent growth this year and 2.7 per cent next year.
Although food and energy inflation have declined, they remain higher than governments’ targets.
“Further significant stress in financial markets has been avoided so far, after the turbulence due to bank failures earlier in the year. That said, the global economy continues to cofront the challenges of elevated inflation, low growth and comparatively weak trade,”said OECD Secretary-General Mathias Cormann.
He called for policy action to enhance competition, for increased investments in low carbon research and development and for reduced trade barriers.
The Outlook cautions that inflation could continue to prove more persistent than projected, with further disruptions to energy and food markets still possible.
“A further slowdown in China would dampen growth in trading partners worldwide and could drag down business confidence. Public debt remains elevated in many countries, in the aftermath of significant fiscal support rolled out in response to the COVID-19 pandemic and the energy price crisis.
To confront inflation, the OECD says monetary policy should remain restrictive until there are clear signs that inflationary pressures are durably abating.
As the effects of past hikes materialise, interest rates in many countries will likely need to remain at or close to their current levels into 2024, it said.
