The Organization for Economic Cooperation and Development (OECD) is warning of a global economic slowdown this year as impacts from the Iran war reverberate around the world.
The Paris-based intergovernmental organization has lowered its global economic growth forecast, warning that the economic damage from the Iran war is likely to worsen.
In its June Economic Outlook, the OECD says that global growth is now expected to slow from 3.4% in 2025 to 2.8% in 2026, before recovering to 3.1% in 2027.
The new outlook is dependant on the current energy price shock from the Iran war easing by the middle of this year.
In a worse-case scenario, in which the disruptions to shipping and energy infrastructure continue into 2027, global growth could fall to 2.1% in 2026 and 1.8% in 2027.
That would tip some economies into, or close to, a recession, warns the OECD.
The OECD says that while energy shortages could weigh heavily on Asian economies, countries such as Japan and South Korea have large reserves and can withstand a lack of oil.
However, other countries, such as India, are now rationing the use of gasoline as they face worsening fuel shortages.
Also in a worse-case scenario, global inflation is expected to rise by 0.4 percentage points in 2026 and 1.3 percentage points in 2027.
Higher energy prices and the inflation situation is likely to further complicate the challenge facing central banks that are also grappling with weaker economic growth.
The OECD concludes its latest outlook by highlighting the need to strengthen global supply chains and diversify energy supplies.
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