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OECD warns global growth depends on a durable Middle East resolution
The OECD cited falling energy inventories, shrinking fiscal space, and rising financing costs as risks as oil and gas prices rebound.
The OECD said the global economy has handled the strains of the Iran war better than first feared, but its outlook is heavily dependent on whether a durable resolution to the Middle East conflict is achieved. In its interim economic outlook, the Paris-based organization said growth proved more resilient than expected when the US-Israeli conflict involving Iran began in late February.
The OECD pointed to factors that helped cushion the impact of limited Gulf oil supplies, including the release of global oil stockpiles, a sharp decline in energy imports by China, and a switch to other fuels such as coal. Still, it warned that a recent resurgence in oil and gas prices poses risks for the coming months.
OECD Secretary General Mathias Cormann said the global economy’s capacity to absorb shocks is not unlimited, citing that energy inventories have fallen and that fiscal space is shrinking. He added that financing costs are rising and that resilience alone is not enough.
Cormann also highlighted risks from rising government debt servicing costs as interest rates rise across major economies. He said 30-year government bond yields are at their highest in 15 years or more in six of the G7 economies, which implies higher debt servicing for strained public budgets and higher borrowing costs for businesses and households.