Economic growth has remained "resilient" in many countries despite the war in the Middle East and energy pressures, the Organisation for Economic Co-operation and Development (OECD) said in its interim report on Wednesday, as it slightly raised forecasts for the year.
Global economic growth is now seen at 2.9%, a 0.1-point increase from earlier estimates in June, the Paris-based group of 38 industrialized countries said.
Even though energy prices have soared since the U.S. and Israel launched strikes against Iran last February, the OECD noted 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 cited the massive investments in artificial intelligence and the resulting boost to production and trade, which could result in "stronger growth than projected".
But global growth has slowed sharply from the 3.4% last year, and the group trimmed its 2027 growth forecast by 0.1 percentage point to 3%.
Governments have started raising interest rates to contain inflation pressures stemming from high oil and gas prices, which have sent diesel and other fuel costs to highs not seen in years.
That has sent government bond yields to levels not seen since the global financial crisis of 2007-2008, pushing up borrowing costs even as countries worldwide grapple with high debt and deficits.
"Rising bond yields underline more than ever the need for enhanced efforts to contain and reallocate government spending, improve public-sector efficiency and strengthen revenues to ensure longer-term debt sustainability and maintain the ability of governments to react to significant shocks," the OECD said.
It also warned of prolonged inflation if the Mideast war continues, with price increases in the G-20 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 said.
For the United States, it expects gross domestic product (GDP) to expand 2.2% this year, up 0.2 points from its June forecast, while the eurozone could see growth of 1%, also up 0.2 points.
Japan's growth is now seen at 0.8%, up 0.2 points, while the forecast for the Chinese economy, the world's second-largest, was held steady at 4.5%.
