The OECD forecasts that the global economy will grow by 3.1% in 2022, and 2.2% in 2023. This is slower than 5.9% growth in 2021. The OECD also expects that the global economy will not be heading into a recession next year, but outlook is very challenging due to the ongoing war in Ukraine, higher inflation and higher interest rates environment.  

The OECD forecasts the US economy to grow by 1.8% in 2022, and 0.5% in 2023, slower than 5.9% growth in 2021. Reasons for the slower growth in 2023 include tighter financial conditions that curb spending and investment decisions among households and businesses in the US.  

Growth outlook in the Euro Area is also expected to be slower due to energy shortage crisis. The OECD forecasts Euro Area to grow by 3.3% for 2022, down to 0.5% in 2023, and to rebound to 1.4% in 2024.  

The UK’s economy on the other hand, is expected to contract by 0.4% in 2023, and rebound to 0.2% in 2024. The high inflation situation is expected to drag into 2023, worsening the cost-of-living situation in the UK. The tighter financial condition will also affect spending and business activities in the UK in 2023.  

The OECD recommends that both monetary policy and fiscal policy should work hand-in-hand to contain price pressure. Meaning that fiscal spending should only be targeted and temporary to protect the most vulnerable households in the high inflation environment, without worsening the government debt situation.  

2023 will be a challenging year based on the OECD’s point of view. The organisation recommends three policies to cope with the challenges, including (i) investing and diversifying energy supply in the long run, (ii) keep international trade open so supply constraint will ease, and (iii) improve employment situation in the labour market.

Source: AmInvest Research - 23 Nov 2022