OECD improves global growth forecast, but worsens Brazil – 03/17/2023 – Market

The global economic outlook has improved from a few months ago as the inflationary shock eases, but rising interest rates will keep risks high, the OECD said on Friday, raising its growth forecasts for major economies.

After a 3.2% expansion last year, the world economy is on track to advance 2.6% this year as monetary tightening by central banks takes effect, the Organization for Economic Co-operation and Development said in its report on economic prospects.

The Paris-based organization improved its global growth forecast after calculating a rate of 2.2% in November, citing a decline in energy and food prices and China’s easing of its Covid restrictions.

Looking ahead to next year, global growth is expected to accelerate to 2.9% — compared with a November forecast of 2.7% — as the hit to household incomes from high energy prices fades.

However, for Brazil, the OECD has downgraded its estimates to an expansion of 1.0% in 2023 and 1.1% in 2024, respectively from 1.2% and 1.4% before.

The organization predicts that inflation in the Group of 20 major economies will fall from 8.1% last year to 5.9% this year and to 4.5% in 2024 – still well above targets despite interest rate hikes. of many central banks.

The OECD said the full impact of higher interest rates was difficult to assess, warning that increased stress for borrowers could translate into losses for some banks, citing the recent collapse of Silicon Valley Bank in the United States as example.

Putting aside the turmoil in financial markets after the SVB crash and continuing concerns about Swiss lender Credit Suisse, the European Central Bank raised interest rates by another 0.5 percentage point on Thursday to fight inflation.

The OECD projected that interest rates will peak at 5.25%-5.5% in the US and 4.25% in the eurozone and UK, with a decline in inflation possibly allowing for “mild” easing in the next year.

The OECD has projected US economic growth to slow from 1.5% this year to 0.9% next year as higher interest rates cool demand. With the US job market behaving better than expected, the projection for this year improved from the 0.5% seen in December, but worsened for 2024 since before the calculation was a 1.0% increase.

Buoyed by the relaxation of measures against Covid, the Chinese economy is expected to grow 5.3% this year and 4.9% in 2024, above November forecasts of 4.6% and 4.1%, respectively.

The outlook for the euro zone has also improved thanks to a drop in energy prices, with the 20-nation bloc expecting growth of 0.8% this year, followed by 1.5% in 2024. The OECD had previously forecast a growth of 0.5% and 1.4%, respectively.