OECD says global economic outlook ‘slightly better’ for 2023 but inflation risks linger

OECD Secretary-General Mathias Cormann said the global economic outlook is “slightly brighter” this year but inflation challenges remain.

“The outlook for the world is slightly brighter at the beginning of 2023 than what we thought it would be just two or three months ago,” he told CNBC’s “Street Signs Asia” on Friday.

“Indeed, energy and food prices are substantially lower than what they were at their peaks,” noted the OECD chief, ahead of a G-20 financial leaders meeting this week in Bengaluru, India.

Energy prices have fallen significantly because Europe was able to “successfully” diversify its sources of energy, Cormann noted. In addition, a “benign winter” helped to reduce energy demand which kept gas prices low, he said.

In November, the OECD said “Russia’s war of aggression against Ukraine has provoked a massive energy price shock not seen since the 1970s.”

“The global economy is projected to grow well below the outcomes expected before the war – at a modest 3.1% this year [2022], before slowing to 2.2% in 2023 and recovering moderately to a still sub-par 2.7% pace in 2024,” it added.

That report further highlighted Asian emerging-market economies are expected to account for close to three-quarters of global GDP growth in 2023, as Europe and the U.S. slow down sharply.

Still, inflation risks continue to persist and need to be tackled well, said the OECD chief.

“Inflation is starting to tick down, but we are not on top of the inflation challenge yet. There is more work to be done to tackle inflation and that comes with risks,” noted Cormann. “And these are risks that will need to continue to be managed well over the weeks and months.”

The OECD chief highlighted the U.S. Federal Reserve took “aggressive action last year,” in terms of hiking interest rates to rein in surging price pressures.

Now the Fed…