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

CNN Business

Global growth will slow further in the coming year, but the world will likely 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 foresee 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 by 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 triggered an energy crisis that boosted inflation around the world, the OECD said in a statement. tuesday.

“Persistent inflation, high energy prices, weak real household income growth, declining confidence and tighter financial conditions are all expected to dampen growth,” he added. IIf energy prices rise further or energy supply is disrupted, growth could be even weaker than expected.

Growth next year will depend « heavily » on the major Asian economies, which will account for nearly three-quarters of global GDP expansion, with the United States and Europe « decelerating sharply », the OECD said.

India is expected to have the second highest growth rate in the world, after Saudi Arabia, at 6.6% in 2022, followed by 5.7% in 2023. The Chinese economy is expected to grow by 3.3% this year, then 4.6% in 2023.

In contrast, the United States is expected to grow by only 1.8% in 2022 and 0.5% in 2023. Growth in the 19 EU countries that use the euro is also expected to decline sharply over the next two coming years, dropping from 3.3% in 2022 to 0.5% in 2023.

Growth in the European and US economies is partly due to government spending on energy subsidies and policies to boost investment such as NextGeneration EU and the Curbing Inflation Act, the OECD secretary-general said on Tuesday. , Matthias Corman.

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

« An end to the war and a just peace for Ukraine would be the most effective way to improve global economic prospects at this time, » Cormann said.

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

The main central banks are aiming for inflation close to 2% and have raised interest rates in an attempt to limit the rise in prices. But the campaign also increases the risks to the economy by raising the costs of servicing debt for households, businesses and governments.

“Higher interest rates, while necessary to moderate inflation, will increase financial hardship for 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 could increase the risk of debt distress,” he 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 bit stronger than other economies. »

— Julia Horowitz contributed to this report.

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