The Organisation for Economic Co-operation and Development (OECD) yesterday slightly raised its growth outlook for the world economy as inflation eases and China has dropped COVID-19 restrictions, but it warned that the recovery faces a “long road.”
The Paris-based organization forecast an economic expansion of 2.7 percent, up from 2.6 percent in its previous report in March, with upgrades for the US, China and the eurozone.
It is still below the 3.3 percent growth recorded last year.
Photo: AFP
“The global economy is turning a corner, but faces a long road ahead to attain strong and sustainable growth,” OECD chief economist Clare Lombardelli wrote in the organization’s Economic Outlook. “The recovery will be weak by past standards.”
The growth forecast for next year remains unchanged at 2.9 percent, the report said.
A drop in energy prices, the untangling of supply chain bottlenecks and China’s sooner-than-expected reopening are contributing to the recovery, it said.
However, core inflation, which strips out volatile energy and food prices, is higher than previously expected, it said.
This might force central banks, which have already raised interest rates in efforts to tame consumer prices, to further hike borrowing costs, the OECD said.
“Central banks need to maintain restrictive monetary policies until there are clear signs that underlying inflationary pressures are abating,” Lombardelli said.
At the same time, the organization warned that higher interest rates around the world are “increasingly being felt,” notably in property and financial markets.
“Signs of stress have started to appear in some financial market segments as investors reassess risks, and credit conditions are tightening,” the report said.
The banking sector was rocked in March by the collapse of US regional lender Silicon Valley Bank, whose demise was partly blamed on high rates bringing down the value of its bond portfolio.
The crisis reverberated across the Atlantic, with the Swiss government forcing Swiss banking giant UBS Group AG to take over troubled rival Credit Suisse Group AG.
“Should further financial market stress arise, central banks should deploy financial policy instruments to enhance liquidity and minimize contagion risks,” Lombardelli wrote.
The OECD also warned that almost all countries have budget deficits and higher debt levels than before the COVID-19 pandemic as they propped up their economies to withstand the shocks of virus restrictions and Russia’s war in Ukraine.
“As the recovery takes hold, fiscal support should be scaled back and better targeted,” Lombardelli said.
As energy prices, which soared following the Russian invasion of Ukraine, fall further, governments should withdraw schemes aimed at supporting consumers, the OECD said.
The organization raised this year’s growth forecasts for the US to 1.6 percent and China to 5.4 percent — both an increase of 0.1 percentage points.
The eurozone also got a slight 0.1-point bump to 0.9 percent.
Britain was upgraded out of recession territory, with growth forecast at 0.3 percent instead of a contraction.
However, the OECD sharply lowered the outlook for Germany to zero growth, while Japan’s GDP is forecast to grow 1.3 percent, a slight downgrade.
NXP Semiconductors NV expects its first automotive-grade 5-nanometer chip built by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to become available for automakers within one-and-a-half years at the earliest, following demand for better computing performance and energy efficiency for connected vehicles, a company executive said yesterday. That would mean a significant upgrade from the 16-nanometer technology NXP adopted in its existing series of microprocessors. NXP chief technology executive Lars Reger made the remarks during a media briefing yesterday in Taipei. The latest updates came after NXP unveiled its plan to source 5-nanometer capacity from TSMC in 2021. This is Reger’s first trip to
AI TREND: TSMC has been rapidly expanding capacity to meet a spike in demand for advanced packaging services, but still expects supplies to be tight for 18 months Arizona is in talks with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) about advanced chip packaging, state Governor Katie Hobbs said yesterday, which is crucial for the manufacturing of artificial intelligence (AI) chips. TSMC, which is building a US$40 billion chip factory in the US state, has not announced plans to build facilities for advanced chip packaging in the US. Advanced packaging processes stitch multiple chips together into a single device, lowering the added cost of more powerful computing. “Part of our efforts at building the semiconductor ecosystem is focusing on advanced packaging, so we have several things in the works around that
The European Commission’s digital chief yesterday said that murky Chinese laws were fueling concerns among foreign firms in the country, following discussions with Beijing officials about critical areas such as artificial intelligence (AI) and data governance. Vera Jourova, who is also the commission’s vice president, made the comments after meeting on Monday with Chinese counterparts including Vice Premier Zhang Guoqing (張國清) in the second “High-level Digital Dialogue” between the two sides. Among the concerns Jourova said she had heard about from European businesses in China was the “unpredictability of the decisions and interpretation of the laws by the regulators.” Beijing has recently implemented
EVADING US CONTROLS? ‘These surveillance chips are relatively easy to manufacture compared to smartphone processors,’ a source said about HiSilicon’s components A Huawei Technologies Co (華為) unit is shipping new Chinese-made chips for surveillance cameras in a fresh sign that the Chinese tech giant is finding ways around four years of US export controls, two sources briefed on the unit’s efforts said. The shipments to surveillance camera manufacturers from the company’s chip design unit, HiSilicon Technologies Co (海思半導體), started this year, said one of the sources and a third source familiar with the industry supply chain. One of the sources briefed on the unit said that at least some of the customers were Chinese. Huawei unveiled new smartphones in the past few weeks that