Hobbled by high interest rates, punishing inflation and , the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.
That was the sobering forecast issued Tuesday by the Paris-based Organization for Economic Cooperation and Development. In the OECD's estimation, the this year, down sharply from a robust 5.9% in 2021.
Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2%.
鈥淚t is true we are not predicting a global recession,鈥� OECD Secretary-General Mathias Cormann said at a news conference. 鈥淏ut this is a very, very challenging outlook, and I don鈥檛 think that anyone will take great comfort from the projection of 2.2% global growth.鈥�
The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses. Figures from the organization showed fully 18% of economic output in member countries being spent on energy after helped . That has confronted the world with an on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.
Inflation 鈥� largely 鈥� 鈥渉as become broad-based and persistent,鈥� Cormann said, while 鈥渞eal household incomes across many countries have weakened despite support measures that many governments have been rolling out.鈥�
In its latest forecast, OECD predicts that the U.S. with higher interest rates 鈥� it鈥檚 raised its benchmark rate six times this year, in substantial increments 鈥� will grind the U.S. economy to a near-halt. It expects the United States, the world's largest economy, to grow just 1.8% this year (down drastically from 5.9% in 2021), 0.5% in 2023 and 1% in 2024.
That grim outlook is widely shared. Most economists next year, though the OECD did not specifically predict one.
The report foresees , to remain well above the Fed鈥檚 2% annual target next year and into 2024.
The OECD's forecast for the 19 European countries that share the euro currency, which are enduring an energy crisis from Russia's war, is hardly brighter. The organization expects the next year before accelerating slightly to 1.4% in 2024.
And it expects : The OECD predicts that , which rose just 2.6% in 2021, will jump 8.3% for all of 2022 and 6.8% in 2023.
Whatever growth the international economy produces next year, the OECD says, will come largely from the emerging market countries of Asia: Together, it estimates, they will account for three-quarters of world growth next year while the U.S. and European economies falter. , for instance, is expected to grow 6.6% this year and 5.7% next year.
, which not long ago boasted double-digit annual growth, will expand just 3.3% this year and 4.6% in 2023. The world鈥檚 second-biggest economy has been hobbled by weakness in its real estate markets, high debts and draconian zero-COVID policies that have disrupted commerce.
Fueled by vast government spending and record-low borrowing rates, the world economy soared out of the pandemic recession of early 2020. The recovery was so strong that it overwhelmed factories, ports and freight yards, causing shortages and higher prices. Moscow's invasion of Ukraine in February and .
After decades of low prices and ultra-low interest rates, the consequences of and interest rates are unpredictable.
鈥淔inancial strategies put in place during the long period of hyper-low interest rates may be exposed by rapidly rising rates and exert stress in unexpected ways,鈥欌�� the OECD said in Tuesday's report.
The being engineered by the Fed and other central banks will make it difficult for heavily indebted governments, businesses and consumers to pay their bills. In particular, a , arising in part from higher U.S. rates, will that borrowed in the U.S. currency and may lack the means to repay their now-costlier debt.
Paul Wiseman And David Mchugh, The Associated Press
