The global economy appears to be in limbo as high inflation, supply-chain pressures, and geopolitical uncertainty all threaten its recovery from the pandemic. Industry leaders and economists are waffling over whether they think it will get worse or hold steady.
On Wednesday, the intergovernmental Organization for Economic Cooperation and Development (OECD), which represents 38 member countries and most of the world’s economy, announced its own prediction: The global economy will continue to tank, but not so much that it will enter a recession.
“Here on this table you can see the country projections,” said OECD’s chief economist Laurence Boone at a press conference for the most recent economic outlook report while gesturing at a chart detailing GDP projections. Boone said there’s “a sea of red arrows reflecting large downward revisions everywhere this year and next year.”
The organization’s leaders were careful to emphasize that OECD’s growth projections do not necessarily imply a forthcoming recession. “We are not forecasting a recession,” said Mathias Corman, the OECD’s secretary general, during the press conference. “We are forecasting lower growth, but we are not forecasting a recession.”
OECD said that prior to Russia’s invasion of Ukraine, the world economy was on a path toward strong recovery from the pandemic, but that has all changed.
“The conflict in Ukraine and the supply-chain disruptions exacerbated by shutdowns in China due to the zero-COVID policy are dealing a serious blow to the recovery,” the organization wrote in its report.
As a result, it projects that global GDP growth will slow to around 3% and stay there throughout next year. OECD’s report also includes a pessimistic view on the future path of inflation, estimating that consumer price inflation will remain elevated at 5.5% for “major advanced economies” in 2022 and 8.5% for the OECD as a whole.
Last December, the OECD’s projections were more optimistic, seeing GDP growth of 4.5% in 2022. Being off by 1.5% that time, another downward red arrow would leave the world economy barely in growth mode.
The implications of slower-than-projected growth include a looming food crisis for low-income countries, according to the OECD. “With public budgets stretched by two years of the pandemic, these countries could struggle to provide food and energy at affordable rates to their populations, risking famine and social unrest,” the organization wrote.
To alleviate or avoid that crisis, Corman said that OECD countries should take “bold, well-designed, and coordinated policy measures.” Those actions include instituting temporary monetary and fiscal policies to combat inflation and taking steps to reorient in the long term toward carbon-free energy.
Considering the revisions made between today’s report and December’s, OECD emphasized the many variables currently impacting the global economy, and wasn’t exactly confident in its own math.
“The uncertainty around this outlook is high,” it wrote.
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