The world economy is slowing down, but moving forward – Kommersant Newspaper No. 217 (7418) dated 11/23/2022

Global economic growth will continue to decline not only this year, but also next year, when it could slow down to 2.2%, according to the Organization for Economic Co-operation and Development (OECD) updated macro forecast released yesterday. In its member countries, growth rates will slow down even more – from 2.8% to 0.8%, while inflation will decrease gradually, which will require maintaining elevated rates until 2024 – the US Federal Reserve may peak at 5-5.25% , and the ECB will increase the rate to 4.25%, OECD analysts expect.

The growth of the global economy this year will be 3.1%, which is almost two times less than in 2021 (5.9%, however, this figure reflected the recovery from the pandemic). Next year, global GDP growth may turn out to be even more modest – 2.2%, according to the updated OECD macro forecast. At the same time, the dynamics of growth will be uneven – three-quarters will be in developing countries in Asia, while a pronounced slowdown in GDP growth is expected in the US and Europe. In 2024, they may begin to accelerate again – up to 2.7% – against the backdrop of rate cuts by leading central banks, the organization expects.

In the economically developed countries included in the OECD, growth will be 2.8% this year, but will slow down to 0.8% next year (in 2024, the growth will be 1.4%). In the United States, contrary to recession expectations, organizations are expecting positive, albeit low, growth rates – the economy could grow by 0.5% (against 1.8% in 2022). In 2024, the figure may accelerate to 1%. In the euro area countries, next year growth rates will be comparable (also 0.5% after an increase of 3.3% this year), in 2024 the figure will accelerate to 1.4%. In Japan, growth rates next year will be higher than this year – 1.8% versus 1.6% (in 2024, however, a slowdown to 0.9% is expected).

In non-OECD countries, growth rates will be 3.4% this year, 3.3% next and 3.8% in 2024, the OECD predicts. In China, it is expected to accelerate from the current record low of 3.3% to 4.6%, followed by a slowdown to 4.1%. In India, by contrast, growth could slow from 6.6% to 5.7% before accelerating further to 6.9% in 2024. In Brazil, growth will slow from 2.8% to 1.2% and 1.4% in 2023-24, respectively.

The main problem for most economies remains high inflation – in the third quarter of this year, price growth in the median developed country will accelerate to 9.6%, in the median developing country – up to 10.8%. The leading factor is the surge in energy prices: for example, the total expenditure on them in OECD countries this year could reach almost 17% of GDP (this is almost twice as much as a year earlier). Such surges in energy costs are closely related to recessionary dynamics, the OECD points out.

Nevertheless, inflation in the main developed countries is expected to slow down from 6.3% this year to 4.25% next year and 2.5% in 2024 – a tighter policy of central banks will lead to a decrease in demand (its contribution to inflation is also considered significant – on average for the studied developed economies, its contribution provided half of the total indicator), and logistics costs are normalizing. In the US, price growth may decrease from 6.2% to 3.5%, in the euro area – from 8.3% to 6.8%, while rates will rise to levels of 5-5.25% and 4.25%, respectively. Recall that the US Federal Reserve, following the results of the November meeting, has already raised the rate to 3.75-4%, in December it is expected to increase by another 0.5 percentage points. Inflation, meanwhile, had already slowed to 7.7% in October. The ECB, in turn, has already raised its lending rate to 2%, inflation in the euro area, however, continues to grow – in October it amounted to 10.6%. The increase in interest rates will also affect developing countries, which will also have to face monetary tightening, the OECD expects.

Tatyana Edovina