PARIS: International economic growth is slow due to decades of high inflation, said the Organization for Economic Cooperation and Development OECD, which has sought attention for essential and advanced monetary policy gaining selected government support.
OECD said that Global Gross Domestic Product GDP is set to grow by 3.1 percent this year, almost half of the GDP recorded the previous year.
The economic recession is going to continue in the coming year, with the global economic growth declining to the tally of 2.2 percent before rebounding to a relatively modest 2.7 percent in 2024, OECD said in its report.
Facing the impacts of Russia’s war in Ukraine, the development has fallen downwards due to persistently high inflation, weak economic confidence, and high uncertainty, OECD said in its latest statistics.
Chief Economist Alvaro Santos Pereira of OECD said that the global economy is suffering from the largest energy crisis due to the Russia-Ukraine War since the energy crisis of 1970.
Energy crisis and economic growth
The energy crisis, felt specifically in Europe, has increased inflation towards a level not imagined for many decades and is hitting economic growth around the world, Santos Pereira added.
Global inflation had been on the rise even before the Russia-Ukraine conflict due to hurdles in the global supply chain after emerged of nations from Covid 19 lockdowns impacted global trade and the economy.
OECD said that inflation, which was set to reach 8 percent in the fourth quarter of this year 2022 in the economies of ‘Group of 20’ G20 countries, would decline to around 5.5 percent in the years 2023 and 2024.
In a positive indication, multiple factors escalating inflation have decreased in the last year. Global supply chains, disrupted during the Covid-19 pandemic, have recovered, and maritime vessel fairs that spiked earlier have been decreased.
Global Economic Growth in Policy Priority
The Chief economist of OECD said that our primary focus is not a global economic recession but a vital growth slowdown in the world economy for the next year, 2023, as well as high inflation in many countries.
The OECD said that fighting inflation is a “top policy priority,” as high prices limit people’s buying power globally.
Recommendations for Economic Growth
OECD recommended strictness in the financial policy of countries with high prices to gain support for families and firms to face huge inflationary burdens and energy prices which will continue to remain high.
OECD further said that in this contemporary difficult and uncertain era, strong economic policy has a significant role to play in further securing economic growth.
The 38-member Group OECD urged for high investment in implementing and green energy sources and technology means to help diversify the supply chain globally.
Disruption in Energy Supply
Gas and oil shipments from major producers like Russia have been declining significantly following the Russian war in Ukraine.
Western countries sanctioned energy exports from Russia, and Russia slashed supplies during the ongoing Russian war in Ukraine.
This catastrophe has sent energy costs twisting and escalated decades of high inflation within vital stable economies causing major world central banks to increase interest rates leading to uninspired and uncontrolled prices.
The strict monetary policies have stirred fears of a slowdown in economic growth as loans prove more expensive for businesses and individual enterprises.
The OECD issued a warning that the northern hemisphere faced a “challenging” winter season even though Europe has enhanced efforts to recharge its natural gas reserves and provision.
OECD report said that the increase in gas prices or supply disruptions in energy resources would bring vital growth decline and higher inflation in the world for the next two years. Global economic growth emphasizes secure diversified energy supplies as an “imperative” element in policy formulation. – APP
