Inflation, rates and bank tremors: the OECD updates its forecasts for 2023 and 2024, and issues a warning

The Organization expects world economic growth of 2.6% this year and 2.9% next year. But he lowered the forecast for Brazil and Argentina. His analysis on the banks.

The OECD revised its global growth forecasts for 2023 and 2024 upwards thanks to the drop in inflation and the reopening of China, although it warned this Friday of the risk generated by the difficulties of some banks.

The Paris-based Organization for Economic Cooperation and Development now expects world economic growth of 2.6% this year and 2.9% next year.

Compared to what was projected in November, the OECD raised its forecast for this year by four tenths and that of 2024 by two tenths. Last year, world growth was 3.2%.

Argentina, no

The OECD revised up its growth projections in 2023 for most of the world’s large economies, although it lowered them in the case of Japan, South Korea, Brazil, Argentina and Turkey.

In the case of Brazil, the organization expects growth of 1% this year, two tenths less than in November. For Argentina, the projection is +0.1%, four tenths less.

And for Mexico, a member of the OECD, the report projects growth this year of 1.8%, two tenths more.

Banking crisis and high rates

The organization published these new forecasts in the midst of a storm in the banking sector.

As he indicated, interest rate hikes by central banks “could continue to expose financial vulnerabilities linked to high indebtedness and an excessive appreciation of certain assets,” as recently demonstrated by the bankruptcy of three North American banks, including Silicon Valley Bank.

The OECD published these new forecasts in the midst of a storm in the banking sector. Photo: Bloomberg

The OECD stressed in its report that the effects of the tightening of monetary policy are being noted “in certain segments of the banking sector, particularly among regional banks in the United States.”

Similarly, the OECD underlined another weakness in the current situation, the fall in real estate prices in many countries, which could impact other sectors of activity.

Despite all this, the OECD sees a “progressive improvement” in the general economic situation throughout 2023 and 2024, with a reduction in inflation.

In the G20 countries, which represent 85% of world GDP, the rise in prices will soften, and will go from 8.1% registered in 2022 to 4.5% in 2024, the OECD forecasts.

The China opening

In addition, world growth will benefit from “the complete reopening of China”, which is expected to rebound in 2023 after three years of zero-covid policy, which had a notable impact on the activity of the second world economy.

Germany, the largest economy in the euro zone, would escape recession this year with growth of 0.3%.

In the United States, growth would reach 1.5%, compared to the 0.5% previously forecast for this year.

China’s growth would be 5.3%, compared to 4.6% anticipated in November. India could have the most robust growth in the G20, at 5.9%.

The OECD also raised the forecast for Spain, to 1.7% in 2023, four tenths more than in November.

AFP

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