High rates, inflation to slow world growth, economic report finds

Hobbled by high interest rates, punishing inflation and Russia's war against Ukraine, the world economy is expected to eke out only modest growth this year and to expand even more tepidly in 2023.

That was the sobering forecast issued Tuesday by the Paris-based Organization for Economic Cooperation and Development. In the OECD's estimation, the world economy will grow just 3.1% this year, down sharply from a robust 5.9% in 2021.

Next year, the OECD predicts, would be even worse: The international economy would expand only 2.2%.

“It is true we are not predicting a global recession,” OECD SecretaryGeneral Mathias Cormann said at a news conference. “But this is a very, very challenging outlook, and I don't think that anyone will take great comfort from the projection of 2.2% global growth.”

The OECD, made up of 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses. Figures from the organization showed fully 18% of economic output in member countries being spent on energy after Russia's invasion of Ukraine helped drive up prices for oil and natural gas. That has confronted the world with an energy crisis on the scale of the two historic energy price spikes in the 1970s that also slowed growth and fueled inflation.

Inflation — largely fueled by high energy prices — “has become broadbased and persistent,” Cormann said, while “real household incomes across many countries have weakened despite support measures that many governments have been rolling out.”

In its latest forecast, OECD predicts that the U.S. Federal Reserve's aggressive drive to tame inflation with higher interest rates — it's raised its benchmark rate six times this year, in substantial increments — will grind the U.S. economy to a nearhalt. It expects the United States, the world's largest economy, to grow just 1.8% this year (down drastically