High interest rates, inflation to slow world growth: OECD

Washington, November 22

Hobbled by high interest rates, punishing inflation and Russia’s war against Ukraine, 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 on Tuesday by the Paris-based Organisation for Economic Cooperation and Development. In the OECD’s estimation, the world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021.

Next year, the OECD predicts, will be even worse: The international economy will expand only 2.2% in 2023, it estimates. The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses.

In its latest forecast, the organisation predicts that the Federal Reserve’s aggressive drive to tame inflation with higher interest rates — it’s raised its benchmark rate six times this year, in substantial increments — will grind the US economy to a near-halt. It expects the US, 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 expect the US to enter at least a mild recession next year, though the OECD did not specifically predict one.

The report foresees US inflation, though decelerating, to remain well above the Fed’s 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 crippling energy shortages from Russia’s war, is hardly brighter. The organisation expects the eurozone to collectively manage just 0.5% growth next year before accelerating slightly to 1.4% in 2024.

And it expects inflation to continue squeezing the continent: The OECD predicts that consumer prices, which rose just 2.6% in 2021, will jump 8.3% for all of 2022 and 6.8% in 2023. — AP

The projections

• The world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021
• Next year, the OECD predicts, will be even worse: The international economy will expand only 2.2% in 2023, it estimates
• It expects the US, 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