The world’s advanced economies are heading for a deepening slowdown as sharply higher interest rates have a sharp impact on activity that could yet become more acute, the inflation-of-around-18-for-february-and-a-return-to-single-digits-in-june-the-annual-cumulative-figure-could-reach-up-to-227-and-be-higher-than-the-2023-record-it-is/” title=”Projection. The market expects inflation of around 18% for February and a return to single digits in June. The annual cumulative figure could reach up to 227% and be higher than the 2023 record; It is confirmed that they see a greater adjustment of the dollar since March or AprilEconomyBy Javier Blanco”>OECD warned.
Growth is losing momentum in many countries and will not pick up until 2025, when real incomes have recovered from the inflation shock and central banks have started to cut borrowing costs, the Paris-based organization said.
The OECD forecasts global gross domestic product to expand just 2.7% next year, after an already weak 2.9% in 2023. The pace will only increase to 3% in 2025, according to the assessment.
Furthermore, the OECD said risks to the forecast are skewed to the downside due to rising geopolitical tensions, the uncertain outlook for trade and the risk that tight monetary policy could harm businesses, consumer spending and employment. more than expected.
“Inflation is falling, but growth is slowing,” OECD chief economist Clare Lombardelli said in a statement. “We are projecting a soft landing for advanced economies, but this is far from guaranteed.”
The bleak outlook points to a long hangover from the global inflationary crisis that followed the Covid pandemic and a rise in energy prices following Russia’s invasion of Ukraine.
Central banks have responded to this with some of the sharpest and fastest rate increases in history and have indicated that they may remain at high levels for some time.
The OECD stated that, even with the decline in key inflation measures, underlying price indicators remain rigid – and monetary policy should remain restrictive until there are clear signs that underlying pressures are lastingly lower.
It expects US rate cuts to only begin in the second half of 2024, and not before spring 2025 in the euro area. This contrasts sharply with market expectations, which are currently assessing that the Federal Reserve and European Central Bank will ease policy in the first half of next year.
The OECD noted that emerging markets are generally in better shape than advanced economies. Among the latter, Europe is behind the US, in part because countries are more sensitive to interest rates as they rely more on bank financing, the organization said.
Many governments face a “challenging fiscal outlook” as debt servicing costs rise, the OECD warned. To respond to the demands of an aging population and the climate transition, he said countries need to make stronger efforts in the short term to create space for future spending.