“The world economy is undergoing its most serious energy crisis since the 1970s.” Economic growth in the world is slowing down under the effect of inflation, noted Tuesday the Organization for Economic Co-operation and Development (OECD), advocating a continued rise in interest rates and more targeted government aid to deal with it.
According to its latest projections, global GDP growth should reach 3.1% this year, barely more than half of the 5.9% achieved last year. The decline will continue next year with growth capping at 2.2%, before picking up to 2.7% in 2024, predicts the organization, which raised its projection for 2022 very slightly compared to September, while keeping the one for next year unchanged.
“An end to the war and a just peace in Ukraine would be the most effective way to improve global economic prospects,” OECD Secretary-General Mathias Cormann said at a press conference, while condemning a “Russia’s War of Aggression”.
“Growth is at half mast, high inflation is persistent, confidence has eroded and uncertainty is high,” lamented the organization, which brings together 38 states.
“The global economy is undergoing its worst energy crisis since the 1970s,” says the OECD’s acting chief economist, Álvaro Santos Pereira. “The energy shock has brought inflation to levels not seen for several decades and lowered growth everywhere in the world”, continues the economist. Price increases are expected to reach 8% in the fourth quarter this year in the G20 countries, which includes the world’s major economies, before falling to 5.5% in 2023 and 2024, according to the organization’s projections.
Better targeted aid
Mathias Cormann believes that inflationary pressure is diminishing, while calling on central banks to firmly pursue their policy of raising interest rates. “We expect inflation to decline gradually thanks to the effects of tighter monetary policies, lower energy demand and price pressures over time, and normalization of transport and delivery times,” he said.
An end to the war and a just peace in Ukraine would be the most effective way to improve global economic prospects
But he stressed that there was always a possibility that “economic activity could weaken even further if energy prices rise even more or if disruptions affect the gas and electricity markets in Europe and in Asia “.
The Secretary General of the OECD acknowledged that government aid had so far been useful in protecting households and businesses, but judged that in the future, this aid “should be temporary and better targeted”. “This would make it possible to limit the budgetary cost as much as possible, to concentrate [les aides] on the most vulnerable and preserve incentives to reduce energy consumption,” he explained.