‘Persistent inflation, high interest rates to weigh on global economy’

OECD 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

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FRANKFURT: 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 Organisation for Economic Cooperation and Development (OECD). The group, made up of 38 member countries, raised its growth forecast this year to 2.7 per cent from an estimated 2.2 per cent in November and foresaw only a tiny acceleration to 2.9 per cent next year.

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 per cent 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 on 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.”