Europe will be hardest hit by global slowdown -OECD

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PARIS – The global economy should avoid a recession next year, but the worst energy crisis since the 1970s will trigger a sharp slowdown, with Europe the hardest hit, the OECD said on Tuesday, urging central banks to continue to raise interest rates.

Global economic growth is expected to slow from 3.1% this year to 2.2% next year before accelerating to 2.7% in 2024, the Organization for Economic Co-operation and Development said, raising its targets slightly. forecast for 2022.

“Our central scenario is not a global recession, but a significant slowdown in global economic growth in 2023, as well as still high, albeit declining, inflation in many countries,” the official said. Acting Chief Economist of the OECD, Alvaro Santos Pereira, in the organisation’s latest economic report. Outlook.

The OECD said the global slowdown was hitting economies unevenly, with Europe hardest hit as Russia’s war in Ukraine both hits business activity and drives energy prices soaring .

It predicted the eurozone economy would slow from 3.3% growth this year to 0.5% in 2023 before recovering to grow 1.4% in 2024. That was slightly better than in recent years. OECD outlook in September, where growth of 3.1% was estimated for this year. and 0.3% in 2023.

He predicted a 0.3% contraction next year in regional heavyweight Germany, whose industry-driven economy is heavily dependent on Russian energy exports – less severe than the 0.7% plunge. expected in September.

Even in Europe, the outlook has diverged, with the French economy, which depends much less on Russian energy, expected to grow by 0.6% next year. Italy recorded growth of 0.2%, which means that several quarterly contractions are likely.

Outside the eurozone, Britain’s economy has been seen down 0.4% next year as it grapples with rising interest rates, soaring prices and weak market conditions. trust. Previously, the OECD expected growth of 0.2%.

The US economy is expected to hold up better, with growth expected to slow from 1.8% this year to 0.5% in 2023 before picking up to 1% in 2024. The OECD had previously forecast growth of just 1.5% this year in the largest country in the world. economy and its estimate for 2023 remained unchanged.

China, which is not an OECD member, was one of the few major economies expected to see growth resume next year after a wave of COVID-related lockdowns. Growth there fell from 3.3% this year to 4.6% in 2023 and 4.1% in 2024, compared to previous forecasts for 2022 of 3.2% and 4.7% for 2023.

With energy prices likely to remain high, the OECD said central banks should continue raising interest rates to fight inflation, with signs that early hikes in Brazil and the United States United were bearing fruit.

While many governments had already spent heavily to cushion the pain of high inflation with energy price caps, tax cuts and subsidies, the OECD said the high cost meant such support should be better targeted in the future.

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