UK growth is also expected to be flat in 2023
More severe fuel shortages could see Europe sink into a recession in 2023, trimming growth by an estimated 1.25 percentage points
THE eurozone is set for near-zero growth next year, as Germany enters a recession , the Organisation for Economic Cooperation and Development predicts.
Russia’s ongoing war in Ukraine, which h as led to spiking food and energy prices, is weighing on the global economy, with global growth downgraded to 2.2pc in 2023 after 3pc this year.
The Paris-based OECD expects eurozone growth of 3.1pc this year, a slight upgrade since June, before falling to 0.3pc in 2023, a downward revision of well over a point since its last forecast in June.
That is largely on the back of a 0.7pc co ntraction in German gross domestic product next year – a cut of 2.4 percentage points on previous predictions – after 1.2pc growth in 2022.
Italy, which on Sunday elected its first far-right government since World War II , is to see growth fall from 3.4pc this year to 0.4pc in 2023.
France will see growth fall from 2.6pc this year to 0.6pc in 2023, the OECD predicts.
The forecasts for Ireland have not been updated since June, when the OECD predicted GDP growth of 4.8pc this year and 2.7pc in 2023, well above the European average.
Eurozone inflation is expected to fall back slightly to 6.2pc next year from 8.1pc in 2022.
But more severe hikes in gas prices and fuel shortages due to Russia’s war in Ukraine could see European growth shrink by a further 1.25pc, plunging the zone into recession, while inflation could be 1.4 points higher.
GDP in the UK, where the new government has just unveiled a mini-budget heavy on tax cuts – causing sterling to nosedive against the dollar – is expected to fall to zero after expanding by 3.4pc this year.
Inflation in the UK is expected to fall from 8.8pc this year to 5.9pc next year.
US growth is predicted to be 1.5pc this year and 0.5pc next year – a one-point cut in the OECD’s June forecast – with predicted inflation of 6.2pc this year and 3.4pc in 2023.
Growth in China is projected to drop to 3.2pc this year, as Covid-19 shutdowns and property market weakness bites, but policy support could help growth recover to 4.7pc in 2023, the Paris-based body said.
Russia sanctions are working, the OECD said, predicting the economy will contract by a further 4.5pc in 2023 after shrinking 5.5pc in 2022 – although the 2022 outturn is a big improvement on the close to 10pc fall in growth the OECD had predicted in June.
OECD secretary-general Mathias Cormann said central banks would hav e to continue raising interest rates and ending stimulus programmes in order to tame price rises.
“Monetary policy will need to continue to tighten in most major economies to tame inflation durably,” he said.