Prices in the G20 group of major economies will grow faster than pre-pandemic for at least two years, and high inflation will remain according to OECD forecast.
Inflation is being pushed up by higher commodity prices and shipping expenses, according to the OECD, a Paris-based policy group. Also, OECD said that inflation in the UK is anticipated to be about 3% by the end of 2022, the highest rate among advanced economies. Inflation in the United States, France, and Germany, on the other hand, is expected to fall.
Inflation has increased around the world as a result of increasing raw material costs, supply limitations, stronger consumer demand as economies reopen, and prices coming back from epidemic lows in some sectors, according to the report.
Prices and transportation costs have risen worldwide due to a significant increase in consumer demand, supply interruptions, and reduced stocks of commodities. Supply shortfalls that persist could lead to a lengthier period of increased inflation.
According to the OECD, G20 inflation will fall from 4.5 percent by the end of 2021 to 3.5 percent by the end of 2022. However, the OECD stated that there is “significant uncertainty” regarding this forecast.
“Faster progress in vaccine deployment or a sharper rundown of household savings would enhance demand and lower unemployment but also potentially push up near-term inflationary pressures,” said the OECD report.
When inflationary pressures relax, some analysts believe that the UK inflation rate would fall, while others believe that enormous government borrowing and spending will lead to high inflation. However, the OECD predicts that inflation in the UK would rise, owing to a high number of job vacancies pushing wages up.
It is stated that “Shortages and labor market mismatch are at least to an extent compounded by Brexit,” an OECD spokesperson said.