If the world avoids a recession, it will have India and China to thank

By Hanna Ziady, CNN Business

Global growth will slow further next year, but the world is likely to avoid a recession thanks to Asia’s largest economies.

Global GDP is expected to grow by 3.1% this year and just 2.2% in 2023, according to the latest forecasts from the Organization for Economic Co-operation and Development (OECD).

Although the OECD does not forecast a recession, its forecast is more pessimistic than that of the International Monetary Fund (IMF), which said last month that it expects the world economy to grow 3.2% this year and 2.7% next year. .

The “fragile outlook” for the global economy is a direct result of Russia’s war on Ukraine, which has sparked an energy crisis that has fueled inflation around the world, the OECD said in a statement on Tuesday.

“Persistent inflation, high energy prices, weak growth in real household income, falling confidence and tighter financial conditions are expected to dampen growth,” it added. meIf energy prices rise further or power supply is disrupted, growth could be even weaker than expected.

Growth next year is “heavily dependent” on the major Asian economies, which will account for about three-quarters of global GDP expansion, with the United States and Europe “slowing sharply,” the OECD said.

India is projected to have the second highest growth rate in the world, after Saudi Arabia, at 6.6% in 2022, followed by 5.7% in 2023. China’s economy is projected to grow by 3. 3% this year, followed by 4.6% in 2023.

By contrast, the United States is expected to grow by just 1.8% in 2022 and 0.5% in 2023. Growth in the 19 EU countries that use the euro is also expected to slow considerably over the next two years, from 3.3% in 2022 to 0.5% in 2023.

The fact that the European and US economies are growing is due in part to government spending on energy subsidies and policies to boost investment such as NextGeneration EU and the Cut Inflation Act, the secretary general of the United States told reporters on Tuesday. OECD, Matthias Cormann.

Savings accumulated by households and businesses during the initial phase of the pandemic will also help support spending, it added.

“An end to the war and a just peace for Ukraine would be the most impactful way to improve the world economic outlook right now,” Cormann said.

The OECD expects inflation to remain above 9% this year among advanced economies. It is then expected to fall again to 6.6% in 2023, slightly above the levels forecast by the IMF.

Major central banks are targeting inflation close to 2% and have been raising interest rates in a bid to limit price increases. But the campaign is also increasing risks to the economy by increasing debt service costs for households, businesses and governments.

“Higher interest rates, while necessary to moderate inflation, will increase financial challenges for both households and corporate borrowers,” the OECD said.

“Low-income countries will remain particularly vulnerable to high food and energy prices, while tighter global financial conditions may increase the risk of further debt problems,” it added.

World Bank President David Malpass recently told CNN that the organization is “worried about a global recession in 2023” but that the United States is “a little bit stronger than other economies.”

— Julia Horowitz contributed to this report.

The CNN Wire
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