<div style="text-align: justify; "><b style="font-size: 1rem;">The global economy must steer through a precarious recovery this year and next as inflation keeps dragging on household spending and higher interest rates weigh on growth, banks and markets.</b><br></div><div style="text-align: justify;"><br></div><div style="text-align: justify;">That was the takeaway Wednesday from the latest economic outlook by the Paris-based Organization for Economic Cooperation and Development. The group, made up of 38 member countries, raised its growth forecast this year to 2.7% from an estimated 2.2% in November and foresaw only a tiny acceleration to 2.9% next year.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The rebound from the COVID-19 pandemic and energy price spike tied to Russia's invasion of Ukraine is likely to be weak by past standards, with average growth of 3.4% recorded in the pre-pandemic years 2013-2019.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The path ahead is fraught with risks, from escalation of Russia's war in Ukraine — with a dam collapse Tuesday that the sides blamed on each other — to debt troubles in developing countries and rapid interest rate hikes having unforeseen effects on banks and investors.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">"The global economy is turning a corner but faces a long road ahead to attain strong and sustainable growth," the intergovernmental organization said. "Global economic developments have begun to improve, but the upturn remains fragile. "</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">It was a more optimistic outlook than the World Bank gave Tuesday, citing similar risks in its expectation for 2.1% global growth this year. That was still an upgrade from its January forecast of 1.7%.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Energy prices have fallen to pre-invasion levels, helping ease the worst of the recent outbreak of inflation. But those costs are still higher than they were before Russia began massing troops on Ukraine's border in early 2021.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Meanwhile, China's reopening after drastic pandemic measures has provided a boost to global activity.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">But core inflation, which excludes volatile energy and food prices, is proving persistent as some companies raise prices to increase profits and workers push for higher wages amid relatively low unemployment.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The OECD sees inflation declining to 5.2% by year end from 7.8% at the end of last year in the Group of 20 countries that make up more than 80% of the global economy. The U.S. should see annual inflation of 3.2% by the last quarter of this year, and Europe's rate should fall to 3.5%.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Those levels would provide some relief but are still above the 2% inflation targets for the European Central Bank and U.S. Federal Reserve, which have been rapidly raising interest rates to fight inflation. That increases the cost of borrowing to buy houses and invest in business expansion.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The OECD cautioned that while central banks need to maintain policies that restrict credit, they "must keep a watchful eye, given the uncertainties around the exact impact" of the rapid hikes.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">"Signs of stress have started to appear" as higher borrowing costs slow property markets and raise concern about the impact of more expensive credit, the organization said.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Countries that spent on pandemic relief for households and businesses already are grappling with higher public debt and now have the added burden of more expensive costs to pay it down.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The United States and Europe both can expect only tepid growth.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The U.S. is facing challenges from higher borrowing costs in rate-sensitive areas like housing construction and manufacturing. As demand slows, unemployment is expected to gradually rise toward 4.5% in 2024 — up from 3.7% in May. With more jobs available and fewer pay increases, inflation is expected to moderate.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">"Nonetheless, the economic outlook could worsen if rising interest rates expose further financial fragilities," the OECD said.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">The failure of Silicon Valley Bank and two other U.S. lenders highlighted problems that could emerge in the banking system if financial institutions suffer losses on investments like bonds, whose value falls when rates go up.</div><div style="text-align: justify;"><br></div><div style="text-align: justify;">Most of the globe's growth will come from Asian economies such as China, India, Indonesia and Singapore. Growth in China is expected to reach 5.4% this year and 5.1% next year as services such as tourism and entertainment recover from COVID-19 lockdowns and infrastructure spending supports a construction boom. Exports should be tempered by weak global demand. AP/UNB</div><div style="text-align: justify;"><br></div><div style="text-align: justify; ">bnbd224/kh</div>