The Organization for Economic Cooperation and Development (OECD) is forecasting that the global economy will expand a tepid 2.2% in 2023 as high interest rates, volatile energy prices, and the ongoing war in Ukraine conspire to slow growth.
The Paris-based OECD added that the world economy is on track to grow 3.1% this year, down sharply from a 5.9% expansion in 2021.
The OECD, which is made up of 38 member countries, promotes international trade and prosperity and issues periodic reports and analysis of the global economy.
The international agency said that 18% of the economic output among its member countries is now being spent on energy after Russia’s invasion of Ukraine. Additionally, inflation “has become broad-based and persistent,” said the OECD.
In its latest forecast, the OECD said that it expects that the U.S. Federal Reserve’s aggressive drive to tame inflation with higher interest rates will grind the American economy to a near halt in 2023.
The OECD forecasts that the U.S., the world's biggest economy, will grow 1.8% this year and 0.5% in 2023. The report also forecasts that U.S. inflation will remain above the central bank’s 2% target until 2024.
The OECD expects Europe to collectively manage 0.5% growth next year before accelerating to 1.4% in 2024.
Most growth next year is expected to come from emerging market countries, notably in Asia. The OECD says three-quarters of world growth next year will come from Asian nations, with India’s economy expected to grow 6.6% this year and 5.7% in 2023.
China's economy is forecast to expand 3.3% this year and 4.6% in 2023. The world’s second-biggest economy has been hurt by weakness in its real estate markets and ongoing zero-COVID-19 policies.
