OECD Revises Up Growth Forecasts, Inflation Eases But Sticky

The OECD published its Economic Outlook and revised up its global growth forecasts from its November estimates. It expects growth to slow to 2.7% this year from 3.3% in 2022 (revised up from 3.1%). Then it should strengthen slightly to 2.9% in 2024. In November, it was forecasting growth at 2.2% in 2023 and 2.7% in 2024. The upward revision has been driven by lower energy prices, recovering business/consumer confidence and the reopening of China.

• The OECD projects China to grow by 5.4% this year and 5.1% next. The US 1.6% and 1% and the euro area 0.9% and 1.5% with Germany at 0% and 1.3%. The OECD is forecast to grow at a lacklustre 1.4% in both years.
• Risks to growth are skewed to the downside driven by uncertainties around inflation, the war in the Ukraine and the upcoming European winter.
• It expects improved supply chains, tighter monetary policy and lower food & energy prices to drive an easing in price pressures with OECD inflation moderating to 6.6% in 2023 from 9.4% in 2022 and then easing further in 2024 to 4.3%. Inflation remains sticky especially in the services sector. With inflation still expected to be above the 2% target of most OECD central banks, rate cuts may be some way off. The OECD says that monetary policy should remain restrictive until there are clear signs that there is an enduring reduction in core inflation.
• Like RBA Governor Lowe, OECD Secretary-General Cormann said that reforms are needed to boost productivity.
• See report here.

Source: MNI - Market News/IMF/OECD/World Bank