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OECD sees moderate GDP global growth; UK to avoid recession

By Frank Prenesti

Date: Wednesday 07 Jun 2023

(Sharecast News) - The global economy is forecast to grow moderately this year as inflationary pressures ease, but a recovery was still some way off, the Organisation for Economic Co-operation and Development (OECD) said in its latest forecasts.
The Paris-based organisation is now forecasting growth of 2.7%, up from 2.6% in its March report, with upgrades for the US, China and the eurozone.

Forecasts for the US and China were lifted by 0.1 percentage points to to 1.6% and 5.4% respectively.

The eurozone was increased by 0.1 points to 0.9% while Britain was upgraded to avoid a recession, with growth now forecast at 0.3% instead of a contraction, but Germany was lowered to zero growth.

"The high interest burden on (UK) public debt and the recent drop in average debt maturity leave the public finances exposed to movements in bond yields," the OECD said in refernce to Britain.

"Renewed increases in wholesale energy prices due to Russia's war of aggression against Ukraine would further squeeze real incomes given the United Kingdom's high dependence on natural gas. Faster-than-expected resolution of uncertainty regarding future trade relationships is an upside risk."

Overall, the the global economy is turning a corner "but faces a long road ahead to attain strong and sustainable growth", said OECD chief economist Clare Lombardelli.

"The recovery will be weak by past standards."

Falling energy prices, an easing of supply chain bottlenecks and China's sooner-than-expected reopening from the Covid pandemic are contributing to the recovery, the OECD said.

It warned that core inflation, which strips out volatile energy and food prices, was higher than previously expected and may force central banks to further hike borrowing costs.

"Central banks need to maintain restrictive monetary policies until there are clear signs that underlying inflationary pressures are abating," Lombardelli said.

Reporting by Frank Prenesti for Sharecast.com

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