One of the most striking graphics from the latest “Global Economic Outlook” report published by the Organisation for Economic Co-operation and Development (OECD) on Nov. 22 demonstrates the amount allocated to energy in the gross domestic product (GDP) of 29 OECD member countries from 1970 to 2022.
During the 1973-74 and 1978-79 oil crises, 17% and 18% of the GDP of these 29 countries, respectively, went toward energy expenditures at a very high cost, and this rate is once again approaching 18% as we reach the end of 2022.
However, the same rate was at 10% or even slightly lower between 1989 and 2000. Although it increased to 13% in 2008 and 2012, it then fell back to 10%. Therefore, it is an indisputable fact that the world economy is once again experiencing a severe energy crisis after 45 years.
The two “black swans,” namely the COVID-19 pandemic and the Russia-Ukraine war, also triggered significant inflationary pressure on the world economy. So much so that in September 2021, looking at the European Union average, the prices of only 15% of the products in the price index basket increased by over 6%, however, the increase reached 55% this September for products that saw an earlier increase of 6% or more.
Excluding Hungary but including Chile, which is at level “zero,” there are only two countries among the 38 OECD members whose real wages have not decreased due to inflation.
The latest report shared by the OECD under the title “Confronting the Crisis” aims to provide forecasts and predictions for the global economic growth rate and shows that global growth is expected to lose momentum towards 2.2% in 2023, against the expected growth rate of 3.1%.
While the 2022 global growth expectation remains unchanged in line with the growth forecast in the previous report, the 2023 growth rate forecast has been adjusted downward. For 2024, it shows that the global economic growth rate is expected to increase to 2.7%. The 2022 GDP growth rate for the Turkish economy has been kept at 5.3%, with a correction of only 0.1 percentage points compared to the previous estimate of 5.4%. Türkiye and Indonesia are expected to grow at the same rate. It seems that among 38 OECD member countries, Türkiye will once again be in the top two in 2022 and the top three among the G-20 countries.
Türkiye's production and export success and its choice of an economic policy that supports growth, a good budget income and employment are reflected positively on the country and viewed as crucial protection.
This choice means that Türkiye has to support its growth by observing and maintaining its success in practicing “fiscal discipline.” As a matter of fact, not even the slightest warning has been made to Türkiye regarding public finance, budget balance or public debt from the International Monetary Fund (IMF), the World Bank, the OECD or any international organization. On the other hand, there are serious warnings regarding the public debt burden and budget performances of many G-7 countries, especially France.
If Türkiye’s inflation rates decline in 2023 at a faster rate than expected, then the tone of the statements regarding inflation in the reports will also change. Türkiye’s economic management always expresses its determination on this issue. Meanwhile, OECD Secretary-General Mathias Cormann stated that they do not foresee a global recession, however, he emphasizes that they predict that there will definitely be a period of slowdown.
The OECD also points out that the global economic slowdown does not affect country’s economies equally, however, Europe was most affected by the global economic slowdown, as energy prices and access to intermediate products adversely affected the activities of many factories due to regional supply problems triggered by the ongoing war in Ukraine.
It is foreseen that the 19 eurozone economies will grow by 3.3% on average this year, the growth will decrease to 0.5% by 2023, and the growth of the region will be at 1.4% in 2024. Germany, considered the locomotive of the European economy, is expected to shrink to minus 0.3% in 2023. The OECD highlights that the U.S. will only grow by 1.5% this year.
