Source: Wall Street News
Author: Porridge Seven
The Organization for Economic Cooperation and Development (OECD) also lowered its forecast for global economic growth after the World Bank slashed its forecast for global economic growth on Tuesday and warned that the global economy may fall into 1970s-style stagflation, with many countries at risk of recession.
On Wednesday, June 8, local time, the OECD lowered its forecast for global economic growth in 2022 to 3% from the previous 4.5%, while forecasting a further slowdown in global economic growth to 2.8% in 2023. However, the OECD’s revised development forecast for 2022 was slightly higher than the World Bank’s previous forecast of 2.9% growth.
The OECD said the world economy would pay a “heavy price” for the Russia-Ukraine conflict, including slower growth, higher inflation and potential long-term damage to supply chains.
There have been some major changes in the global economic environment in recent months, including the global spread of the Omicron variant and higher-than-expected persistent inflationary pressures, however, the biggest change has been the economic impact of the Russian-Ukrainian conflict.
In line with the World Bank’s warning, the OECD said the deeper and broader economic fallout from the Russian-Ukrainian conflict could make it harder for countries to set the right fiscal and monetary policies.
The OECD now estimates that consumer prices in its 38 member countries will rise at an average rate of 9% this year, double the inflation rate it expected in December. The rebound in inflation has been particularly pronounced in some European countries. For example, the Netherlands is expected to average annual inflation of 9.2% in 2022, while prices are expected to rise by 3.1% in December; the United Kingdom will reach an average growth rate of 8.8% this year. That was double the December forecast of 4.4%.
The impact of inflation has forced central banks to tighten monetary policy, with central banks around the world raising key interest rates more than 60 times in the past three months, the highest level since early 2000.
While the OECD said all monetary authorities had reasons to scale back stimulus, it also urged caution in the euro area in particular, as price increases in the region largely reflect supply pressures. In addition, the report said the hit to consumer confidence is curbing investment, which in turn could hurt supply for years to come.
Central banks must strike a delicate balance between containing inflation and sustaining a post-pandemic rebound, especially if the recovery is not yet complete.
The OECD lowered its U.S. growth forecast to 2.5% this year and 1.2% next year from 3.7% and 2.4% previously. OECD chief economist Laurence Boone said:
The choices of policymakers and citizens will be the key to determining how this price (the impact of the Russian-Ukrainian conflict) is distributed among the people and the state. Some Western economies could face a period of contraction this year if energy prices rise again or if interest rate hikes by central banks such as the Federal Reserve aimed at controlling inflation have unintended consequences.
However, on the issue of whether the world economy will fall into stagflation in the future, the OECD is still cautious about whether the global economy is on the brink of stagflation; and the World Bank, in its latest report, compares the current economic situation with the stagflation period of 1970. It made the “first systematic” comparison, arguing that the global economy could enter a “prolonged period of weak growth and rising inflation”.
Boone said that the top priority of governments should be to address the food shortages threatening many countries in Africa and the Middle East, and global cooperation is imperative:
Global cooperation is needed to ensure that food reaches consumers at affordable prices, especially in low-income and emerging market economies. This may require more international assistance, as well as cooperation in logistics for transport and distribution to countries in need.
Editor/Jeffrey
This article is reprinted from: https://news.futunn.com/post/16273573?src=3&report_type=market&report_id=207692&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.