OECD: persistent inflation and China, the great global economic risks

The persistence of high inflation, which is what has forced central banks to raise their rates, constitutes the main risk for the global economy indicated this Tuesday by the OECD, which also focuses on Chinawhich is going through a slowdown phase.

“There are significant risks“said the chief economist of the Organization for Economic Cooperation and Development (OECD), Clare Lombardelliwhen presenting its interim Perspectives report to the press at its Paris headquarters.

“Inflation may be more persistent than expected“, warning Lombardelliwhich referred in particular to the 25% increase since May in the price of oil, which this morning touched the bar of US$95 per barrel of Brent.

In its report, the organization predicts that inflation in the G20, which rose to 7.8% in 2022 due to the rise in energy and food prices in the heat of the Russian invasion of Ukraine, should moderate to remain within averages 6% in 2023 and 4.8% in 2024.

In this context, he insisted that monetary policy “must remain restrictive until there are clear signs that inflationary pressures subside on a lasting basis”.

The European Central Bank (ECB) decided last week to raise its reference rate for the tenth time since July 2022 to a record 4%, in line with what, for example, the United States Federal Reserve has also done.

For the chief economist of the OECD“necessary to reduce inflation, but painful”.

He also said that another risk for the global economy is the situation in Chinaafter the organization has revised downwards its growth forecasts both for this year (three tenths, to 5.1%) and for the next (five tenths, to 4.6%).

Behind this slowdown are, above all, the high levels of debt and the situation of the real estate sector.

The OECD He also showed his concern about the progress of international trade, which has been declining for three consecutive quarters, with a 2.5% drop in the exchange of goods in the first half of the year compared to the same period in 2022.

In services, however, things have been much better, especially thanks to tourism, which has continued to recover quickly after the break during the COVID crisis.

The public debt in the countries of the OECD It has increased by 10 points of gross domestic product (GDP) since the COVID crisis, up to 113% of GDP at the end of 2022, and that figure should rise somewhat more this year and next.

The chief economist said that member countries have to take into account the high volume of public debt and at the same time be aware that they have to prepare for the aging of the population, the energy and digital transition, which will require more public spending in those sections.

That is why he opted to apply “ambitious structural reforms” that allow raising the potential growth of the economy, which has been declining over time.

Source: EFE