The Organization for Economic Co-operation and Development (OECD) has worsened the forecast for the growth of the global economy this year. The main reason is the conflict in the Middle East, which exposes the resilience of the world economy to a “severe test”. TASR reports on this based on the OECD report.
- The OECD lowered its global economic growth forecast for this year.
- The main reason is the conflict in the Middle East.
- The conflict causes energy prices to rise and increases inflation.
- The OECD prepared two development scenarios according to the length of the conflict.
- Economic growth will slow down, recovery is expected later.
The main question, according to the OECD, is how long the war in the Middle East will last. If the conflict drags on into next year, recession in some countries and significantly higher inflation are a real possibility. If the conflict turns out to be short-lived, oil and gas production in the Persian Gulf countries could gradually return to pre-crisis levels from the 3rd quarter.
The growth rate of the world economy should slow to 2.8% in the base (more optimistic) scenario this year from 3.4% last year, the organization said in its new OECD Economic Outlook report. Back in March, it expected an increase of 2.9%. In 2027, the expansion should revive to 3.1%.
Conflict increases inflation
Conflict in the Middle East has become the dominant factor shaping the outlook for the global economy, prompting the organization to cut its gross domestic product (GDP) growth forecasts while raising its inflation forecasts, according to the OECD.
“Energy prices and prices of other key agricultural and industrial inputs produced in the Gulf countries have risen sharply since February as both production and exports have been curbed. This is accelerating inflation, putting pressure on real incomes and economic growth,” the OECD said. According to the OECD, the duration and scope of the conflict is uncertain. However, its impact will probably be felt by the global economy for some time after its end, “as it will take months to restore damaged infrastructure and transport routes and transport products around the world”.
They showed two scenarios
In view of this uncertainty, the OECD presented two possible scenarios for the development of the global economy in its report. In the time-limited disruption scenario, he expects “broad disruptions to remain relatively short-lived. In the long-term disruption scenario, broader disruptions will persist well into 2027 and have much longer-lasting negative consequences. Both scenarios play out against the backdrop of otherwise solid underlying dynamics in the global economy, with output supported by high AI-related investment, manufacturing and trade, lower tariff barriers and favorable financial and fiscal conditions.’
Growth in North America and Europe will slow slightly at first before a cautious recovery begins, according to the OECD. The US economy is expected to grow 2% this year and 1.8% in 2027, after expanding 2.1% in 2025. Canada’s GDP growth rate is expected to fall to 1.2% before recovering to 1.7%.
The eurozone economy will improve by 0.8% this year, with expansion expected to accelerate to 1.2% in 2027 thanks to a recovery in domestic demand and trade. According to the OECD, the growth of the Chinese economy will slow down to 4.5% in 2026 and 4.3% in 2027. High energy consumption and its dependence on imports make the country vulnerable to the global increase in the price of oil, which is mitigated by the increasing use of renewable energy sources.
