The global economy must steer through a precarious recovery this year and next as inflation keeps dragging on household spending and higher interest rates weigh on growth, banks and markets.
That was the takeaway Wednesday from the latest economic outlook by the Paris-based Organization for Economic Cooperation and Development. The group, made up of 38 member countries, raised its growth forecast this year to 2.7% from an estimated 2.2% in November and foresaw only a tiny acceleration to 2.9% next year, AP reported.
The rebound from the Covid-19 pandemic and energy price spike tied to Russia's invasion of Ukraine is likely to be weak by past standards, with average growth of 3.4% recorded in the pre-pandemic years 2013-2019.
The path ahead is fraught with risks, from escalation of Russia's war in Ukraine — with a dam collapse Tuesday that the sides blamed on each other — to debt troubles in developing countries and rapid interest rate hikes having unforeseen effects on banks and investors.
“The global economy has begun to improve," OECD Secretary-General Mathias Cormann said at a news conference. “We are projecting a recovery over 2023 and 2024. However, at this point, it is a recovery to low global growth.”
“Economic indicators are showing some improvement,” he said. “But the upturn remains fragile.”
It was a more optimistic outlook than the World Bank gave Tuesday, citing similar risks in its expectation for 2.1% global growth this year. That was still an upgrade from its January forecast of 1.7%.
Energy prices have fallen to pre-invasion levels, helping ease the worst of the recent outbreak of inflation. But those costs are still higher than they were before Russia began massing troops on Ukraine's border in early 2021.
Meanwhile, China's reopening after drastic pandemic measures has provided a boost to global activity.
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