People shop near prices displayed at a supermarket on February 13, 2023 in Los Angeles, California.
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OECD Secretary-General Mathias Cormann said the global economic outlook is “slightly better” this year but inflation challenges remain.
“The outlook for the world as we enter 2023 is a little brighter than we thought two or three months ago,” he told CNBC’s Street Signs Asia on Friday.
“Indeed, energy and food prices are substantially lower than when they were at their peaks,” the OECD leader noted ahead of a meeting of G-20 finance leaders this week in Bengaluru, India.
Energy prices have fallen significantly because Europe is “successfully” diversifying its energy sources, Cormann noted. In addition, a “benign winter” helped reduce energy demand, which kept gas prices low, he said.
In November, the OECD said: “Russia’s war of aggression against Ukraine has provoked a massive energy price shock not seen since the 1970s.”
“The global economy is forecast to grow well below what was expected before the war – at a modest 3.1% this year [2022]before slowing to 2.2% in 2023 and modestly recovering to a still-below-average pace of 2.7% in 2024,” it added.
This report further highlighted that emerging Asia is expected to account for almost three quarters of global GDP growth in 2023 as Europe and the US slow down sharply.
inflation risks
Still, inflationary risks remain that need to be addressed well, the OECD chief said.
“Inflation is starting to fall, but we have not yet overcome the inflation challenge. More needs to be done to fight inflation and that comes with risks,” Cormann noted. “And these are risks that must continue to be well managed over the weeks and months.”
The OECD chief stressed that the US Federal Reserve took “aggressive action” to hike interest rates over the past year in a bid to curb mounting price pressures.
Now the Fed continues to fight inflation in “a steadier fashion so the data can come through and … the measures that are in the pipeline can take effect,” Cormann noted. “That’s what we expect from central banks around the world to continue to monitor the data and continue to adjust decisions.”
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In early February, the US Federal Reserve raised its benchmark interest rate by a quarter of a point, giving little sign that it was nearing the end of this cycle of rate hikes.
Last month, the OECD chief highlighted that China’s reopening was “overwhelmingly positive” in the global fight against rising inflation. In early December, Beijing suddenly backed away from its zero-Covid policy.
“In the medium to longer term, this is very positive in ensuring supply chains function more efficiently and effectively and ensuring demand in China and trade in general resumes in a more positive pattern,” Cormann told CNBC at the World Economic Forum in Davos, Switzerland.
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