Tue, Feb 06, 2024 page12

• OECD raises its world economic growth outlook

  • AFP, paris
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  The Organisation for Economic Co-operation and Development (OECD) yesterday raised its world economic growth forecast for this year, but warned that the Middle East conflict posed a risk, with disruptions in Red Sea shipping threatening to increase consumer prices.

  The OECD now expects a 2.9 percent expansion, up from 2.7 percent in its previous forecast in November last year, as it sharply lifted the outlook for the US, the world’s top economy.

  Global growth “proved unexpectedly resilient” last year, reaching 3.1 percent as inflation declined faster than anticipated, with strong growth in the US and emerging markets offsetting slowdowns in European nations.

  

  The logo at the entrance of the Organisation for Economic Co-operation and Development headquarters in Paris is pictured on June 7, 2017.

  Photo: AP

  However, indicators suggest “some moderation” of growth, with higher interest rates affecting the credit and housing markets while global trade remains subdued, the OECD said.

  While inflation is falling in major economies, “it is too soon to be sure that underlying price pressures are fully contained” the OECD added in an update to its annual economic outlook.

  The OECD highlighted the threats from the war between Israel and Hamas in Gaza, and the attacks on ships in the Red Sea by Yemeni rebels who say they were targeting Israel-linked ships in solidarity with the Palestinians.

  US and UK forces have responded with strikes against the Houthi rebels, who have since declared US and UK interests to be legitimate targets as well.

  “High geopolitical tensions are a significant near-term risk to activity and inflation, particularly if the conflict in the Middle East were to disrupt energy markets,” the report said.

  “A widening or escalation of the conflict could disrupt shipping more extensively than presently expected, intensify supply bottlenecks, and push up energy prices if traffic is interrupted in the key routes for the transport of oil and gas from the Middle East to Asia, Europe and the Americas,” it added.

  About 15 percent of global maritime trade volume passed through the Red Sea in 2022, the OECD said.

  The attacks have sharply raised shipping costs and lengthened delivery times of goods as companies have rerouted their vessels around the southern tip of Africa, increasing their journey by as much as 50 percent, it said.

  Production schedules have been disrupted in Europe, notably for automakers, the report said.

  The recent 100 percent increase in shipping costs, if persistent, could add 0.4 percentage points to consumer price inflation after about a year, the OECD said.

  The organization said monetary policy needs to “remain prudent” to ensure that inflationary pressure is “durably contained.”

  “Growth could also be weaker than projected if the lingering effects from past policy rate increases are stronger than expected,” it said.

  Inflation this year is expected to slow to 2.3 percent in the US, 2.6 percent in the eurozone and 3.6 percent in the UK, the OECD projected.

  The US economy is forecast to grow by 2.1 percent this year, up from 1.5 percent in the previous outlook, but the eurozone’s outlook was downgraded to 0.6 percent growth from 0.9 percent previously.

  The forecast for China, the world’s second-biggest economy, remained unchanged at 4.7 percent.
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