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'Downside risks remain' for the global economy, OPEC warns

Economists at the Organization of Petroleum Exporting Countries painted something of mixed picture of the global economy after keeping many of their growth estimates static compared to previous estimates. File photo by Mohamed Messara/EPA-EFE
1 of 2 | Economists at the Organization of Petroleum Exporting Countries painted something of mixed picture of the global economy after keeping many of their growth estimates static compared to previous estimates. File photo by Mohamed Messara/EPA-EFE

March 14 (UPI) -- Risks remains, though economists at the Organization of the Petroleum Exporting Countries offered a mix assessment on the health of the global economy, flooding its monthly market report with caveats about central bank policies and geopolitical uncertainties.

In its monthly market report, OPEC looked back to 2022, revising its estimate for global growth slightly higher due to gains posted during the second half of the year. Looking ahead, however, economists kept their forecast for 2023 growth unchanged at 2.6%, a downturn from the 3.2% expansion last year.

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In the U.S. economy, OPEC left its estimates for both 2022 and 2023 unchanged, at 2.1% and 1.2%, respectively. Pointing to consumer confidence, OPEC said readings remain somewhat above pre-pandemic levels, despite waning sentiment from December to January.

Nevertheless, OPEC sees confidence in the U.S. economy at a "sound level."

On Tuesday, the U.S. Commerce Department reported that consumer level inflation increased by 6% over the 12-month period ending in February, far below levels closer to 9% during the summer.

Consumer-level inflation remains well above the 2% target rate for the U.S. central bank, though President Joe Biden said policymakers are tackling inflation "from a position of strength."

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"The US economy is forecast to perform relatively well in 2023, albeit below the 2.1% growth level in 2022," OPEC economists wrote. "Relatively high interest rates and the tight labor market are the major factors that are holding back high growth rates in the current year."

The U.S. Federal Reserve meets next week to consider its next steps in fighting consumer-level inflation.

On China, the world's second-largest economy, OPEC saw an expansion of 3% last year and expects growth of 5.2% for 2023, just below the growth target of 5% outlined by the Chinese government.

China is rebounding from tight pandemic-related restrictions this year and OPEC said its reopening "will add considerable momentum to global economic growth."

That forecast was clouded by China's past reliance on exports to drive growth in its economy. OPEC found that exports declined during the 12-month period to January by 6.8%, compared with a decline of 8.7% over the annual period ending in November.

"With rising tensions in global trade, it remains to be seen how this sphere will develop going forward," OPEC said.

Some of those tensions could be linked to policies in the U.S. Inflation Reduction Act, which prioritizes a made-in-America economy, particularly for electric vehicles, where China holds a leadership position.

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Globally, OPEC seemed to hedge its bets on future growth. China's recovery, which outpaces its peer economies, should keep consumer-level inflation elevated, but soaring higher rates could throttle any significant month.

Because of that, OPEC said that "downside risks remain and need to be carefully monitored in the coming months."

Markets were mixed early Tuesday after reeling from recent bank failures in the U.S. economy. Crude oil prices were in retreat, though all major U.S. indices were in positive territory.

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