OECD Hikes Global Growth Forecast for 2023, 2024

An employee works on the production line of a tyre factory under Tianjin Wanda Tyre Group, which exports its products to countries such as US and Japan, in Xingtai, Hebei province, China May 21, 2019. REUTERS/Jason Lee
An employee works on the production line of a tyre factory under Tianjin Wanda Tyre Group, which exports its products to countries such as US and Japan, in Xingtai, Hebei province, China May 21, 2019. REUTERS/Jason Lee
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OECD Hikes Global Growth Forecast for 2023, 2024

An employee works on the production line of a tyre factory under Tianjin Wanda Tyre Group, which exports its products to countries such as US and Japan, in Xingtai, Hebei province, China May 21, 2019. REUTERS/Jason Lee
An employee works on the production line of a tyre factory under Tianjin Wanda Tyre Group, which exports its products to countries such as US and Japan, in Xingtai, Hebei province, China May 21, 2019. REUTERS/Jason Lee

The global economic outlook has improved from a few months ago as the inflation shock eases but rising interest rates will keep risks high, the OECD said on Friday, hiking its growth forecasts for major economies.

After growth last year of 3.2%, the world economy is on course to expand 2.6% as central bank tightening takes full effect, the Organization for Economic Cooperation and Development said in its interim economic outlook.

The Paris-based organization raised its forecast for global growth from 2.2% in its last Economic Outlook in November, citing a decline in energy and food prices and China's easing of its anti-COVID restrictions.

Looking to next year, global growth was expected to accelerate to 2.9% - compared with a November forecast of 2.7% - as the hit to household incomes from high energy prices faded, Reuters reported.

The OECD forecast that inflation in the Group of 20 major economies would fall from 8.1% last year to 5.9% this year and further decline to 4.5% in 2024 - still well above targets despite interest rate hikes by many central banks.

It said the full impact of higher interest rates was hard to gauge, warning that increased stress for borrowers could translate into losses for some banks, citing the recent collapse of Silicon Valley Bank in the United States as an example.

Setting aside turmoil in financial markets following SVB's failure and continued worries about Swiss lender Credit Suisse, the European Central Bank hiked interest rates by a further half percentage point on Thursday to fight inflation.

The OECD projected that central bank policy rates would peak at 5.25-5.5% in the United States and 4.25% in the euro area and Britain with a decline in inflation possibly allowing for a "mild" easing next year.

The OECD forecast that US economic growth would slow from 1.5% this year to 0.9% next year as higher interest rates cooled demand. With the US labour market holding up better than expected, the forecast for this year was up from 0.5% in November and down from 1.0% for 2024.

Boosted by the easing of anti-COVID measures, the Chinese economy was seen growing 5.3% this year and 4.9% in 2024, up from November forecasts for 4.6% and 4.1% respectively.

The outlook for the euro area had also improved thanks to a drop in energy prices with the 20-nation bloc expected to see growth this year of 0.8% followed by 1.5% in 2024. The OECD had previously forecast 0.5% and 1.4% growth respectively.



US Locks in Steep Tariff Hikes on Chinese Imports

Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
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US Locks in Steep Tariff Hikes on Chinese Imports

Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)

The Biden administration on Friday locked in steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles, to strengthen protections for strategic domestic industries from China's state-driven excess production capacity.

The US Trade Representative's office told Reuters that many of the tariffs, including a 100% duty on Chinese EVs, 50% on solar cells and 25% on steel, aluminium, EV batteries and key minerals, would go into effect on Sep 27.

The USTR determination showed a 50% duty on Chinese semiconductors, which now include two new categories - polysilicon used in solar panels and silicon wafers - are due to start in 2025.

Adjustments to the punitive “Section 301” tariffs on $18 billion worth of goods announced in May by President Joe Biden were minimal and disregarded auto industry pleas for lower tariffs on graphite and critical minerals needed for EV battery production because they are still too dependent on Chinese supplies.

USTR left unchanged the tariff increase to 25% from zero on lithium-ion batteries, minerals and components, with the increase for batteries for EVs taking effect Sep 27 and those for all other devices, including laptops and cell phones, on Jan 1, 2026.

Lael Brainard, the top White House economic adviser, told Reuters that the decision was made to ensure that the US EV industry diversifies away from China's dominant supply chain.

She said such “tough, targeted” tariffs are needed to counteract China's state-driven subsidies and technology transfer policies that have led to over-investment and excess production capacity.

But Washington is investing hundreds of billions of dollars worth of its own tax subsidies to develop domestic EV, solar and semiconductor sectors.

“The 100% tariff on electric vehicles here does reflect the very significant unfair cost advantage that Chinese electric vehicles in particular are using to dominate car markets at a breathtaking pace in other parts of the world,” Brainard said.

China has vowed retaliation against the “bullying” tariff hikes and argued that its EV industry's success is due to innovation, not government support.

The higher US tariffs take effect as Vice President Kamala Harris and former President Donald Trump are both courting voters in auto and steel producing states, trying to position themselves as tough on China ahead of the November presidential election.

Trump has vowed to impose 60% tariffs on all Chinese imports.

The European Union and Canada also have announced new import tariffs on Chinese EVs, the latter matching the 100% US duties.

The final tariff decision does provide some temporary relief for US port operators who were facing a new 25% tariff on massive ship-to-shore cranes, an industry that China dominates with no US producers.

The duty would add millions of dollars to the cost of each crane.

USTR said it will allow exclusions from the tariffs for any Chinese port cranes that were ordered prior to the May 14 initial tariff announcements, as long as they are delivered by May 14, 2026.

USTR raised tariffs to 50% on medical face masks and surgical gloves, from an initially proposed 2%, but delayed their start to allow a shift to non-Chinese suppliers.

The planned duty on Chinese syringes, which were in short supply during the COVID-19 pandemic, will immediately rise to 100% from a previously planned 50%, but USTR will allow a temporary exclusion for enteral syringes, used to feed infants, for a year.

The agency also said it will consider requests for tariff exclusions for five Chinese industrial machinery categories, including those for machinery for purifying or filtering liquids, industrial robots and printing machinery.

It will allow tariff exclusions for Chinese solar wafer and cell manufacturing equipment, but not for equipment used to make full solar modules.