The OECD reduces global growth to 2.2% in 2023 (1.5% for Spain)

Analysts from the Organization for Economic Co-operation and Development (OECD), in their new economic growth projections for 2022 and 2023, have revised up Spain’s gross domestic product (GDP) growth for 2022 by three tenths of a percentage point to 4.4% from their June estimate. In the meantime, they lowered their projection for Spanish GDP growth in 2023 by seven tenths of a percentage point to 1.5%.

On inflation, analysts have raised Spain’s average CPI growth rate in 2022 to 9.1% (previous estimate of 8.1%) and 5.0% in 2023 ( previous estimate of 4.8%).

OECD analysts also cut their global GDP growth estimates in their latest update. They now forecast global GDP growth of 2.2% in 2023, down from their previous estimate of 2.8%. In its report, the OECD indicates that, despite the revival of activity following the decreasing impact of the pandemic, global growth will remain moderate in the second half of the year. He also points out that the key factor in the slowdown in growth is the general tightening of monetary policy, under the effect of a higher than expected rise in inflation.

Additionally, they point out that China’s strict lockdowns to fight the pandemic are also impacting global economic growth. They also point to rising inflationary pressures, indicating that tight labor markets are driving up wages. This helps to mitigate the loss of purchasing power, but also contributes to generalized inflation. According to the OECD, this wage growth has strengthened in the United States, Canada and the United Kingdom.

OECD analysts expect inflation to remain high, but peak in the current quarter and decline in the next quarter and into 2023 in most countries. In this regard, they point out that the US will see more progress in reducing inflation than either the Eurozone or the UK. Additionally, with the recent rise in energy costs and tighter monetary policies in Europe still lagging the US, headline inflation and core inflation are expected to remain elevated.