OECD says economies weathering Iran war shocks, but warns of persisting inflation

Economic growth has remained “resilient” in many countries despite the war in the Middle East, the OECD says, slightly raising its GDP forecasts for the year.

Global economic growth is now seen at 2.9 percent, a 0.1-point increase from estimates in June by the Paris-based group of 38 industrialized countries.

Even though energy prices have soared since the United States and Israel launched strikes against Iran in February, the OECD notes that “broader financial conditions remain supportive,” as seen in rising equity markets and continued access to credit.

“Sizeable oil inventories, additional supply from outside the Gulf economies and discretionary government support measures all helped to cushion the impact on the global economy,” the group said in its quarterly update.

It also cites the massive investments in artificial intelligence and the resulting boost to production and trade, which could result in “stronger growth than projected.”

But it warns of prolonged inflation if the Mideast war continues, with price increases in the G20 group of developing and emerging economies seen at 4.1% overall this year.

“Other significant downside risks include potential weather-related supply shocks, including a very strong El Nino, that adversely impact agricultural production and add to rising food price pressures,” it says.