A group of 38 industrial countries stated in its quarterly report that global economic growth is now forecast to slow to 2.8% this year if oil and gas exports from the Persian Gulf countries return to pre-conflict levels in the third quarter.
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Previously, the OECD forecast that the world economy would grow by 2.9% this year.
However, if the war in the Middle East continues next year, global growth could slow to 2.1%, the OECD said, which is significantly less than the average annual growth of 3.4% recorded from 2013-2019 before the COVID-19 pandemic.
“The longer the disruptions last, the greater the economic and social costs,” said the group’s chief economist Stefano Scarpetta in the report.
He noted that many countries face the risk of recession, and a reduction in investment spending – “including energy-intensive artificial intelligence” – is likely to increase unemployment.
Long-term high prices for energy, fertilizers, and other key products made from hydrocarbons in the Persian Gulf will particularly impact developing countries, where “energy and food make up a larger share of household consumption.”
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Even if the war, triggered by US and Israeli strikes on Iran at the end of February, ends in the coming weeks, the OECD forecasts that global inflation will accelerate to 4% this year from 3.4% in 2025.
Under this “limited duration disruption scenario,” the OECD forecasts that US economic growth will slow to 2% this year and 1.8% in 2027. Last year, the country’s economy grew by 2.1%.
In the Eurozone, where many countries are highly dependent on energy imports, GDP growth this year will slow from 1.4% recorded last year to 0.8%, assuming a ceasefire is secured in the Middle East in the coming weeks.
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