OECD raises growth forecast, says recovery fragile

The OECD today raised its forecasts for economic growth this year and in 2024, but cautioned of a fragile, moderate recovery with risks skewed to the downside.

In its Economic Outlook published today, the OECD projects global gross domestic product (GDP) growth of 2.6pc this year and 2.9pc in 2024, both upwards revisions from the respective 2.2pc and 2.7pc forecasts it made in November. It said lower energy and food prices are key factors in the higher forecasts, as these are helping to lower inflation rates, and the reopening of China from lockdown restrictions should promote global activity.

But these growth rates would be weaker than in any two-year period since the 2008 global financial crisis, excluding the beginning of the pandemic, the OECD said.

"All but two G20 economies are projected to have slower growth in 2023 than in 2022, with China being a notable exception owing to the easing of anti-Covid restrictions," it said.

It said that while data from the early months of this year point to a near-term improvement in growth prospects for the largest economies, the recovery is fragile. It particularly noted uncertainty about the direction of the war in Ukraine as "a key concern," with regard to risks to food and energy security and the effects of the embargoes and price caps imposed by various regions on Russian commodities.

Another risk highlighted is the direction of monetary policy, and the OECD urged policymakers to "remain responsive to new data". It said the effects of widespread higher interest rates, a policy designed to bring down rates of inflation, is uncertain, "with few previous precedents to inform policy analysis." It said that with energy and food prices having fallen there is a case for withdrawing the broad measures designed to protect consumers, and for their replacement with more targeted support.

The OECD forecasts inflation in the G20 to fall to 5.9pc in 2023 and 4.5pc in 2024, after a rate of 8.1pc in 2022.

By Ben Winkley