The reduction of inflation in the Eurozone, as well as globally, is predicted by the OECD for 2024 in its latest report (Interim Economic Outlook), but warns of the risk of new shocks in the international food and energy markets.

In particular, it states that the occurrence of the El Niño phenomenon, which began in June, is likely to negatively affect the production of certain foods next year. It also notes that restrictions on exports by key producers are limiting supply on international markets, particularly rice, whose price is at 15-year highs.

In addition, the war in Ukraine always carries the risk of putting new pressures on the prices of grains, corn, edible oils and fertilizers. The agreement on grain exports via the Black Sea has expired and there is uncertainty about the extent to which Ukraine can use alternative routes for their exports through Europe.

The OECD also sees risks for energy markets. Although prices have fallen far from their 2022 highs following Russia’s invasion of Ukraine, he notes that “energy markets remain tight and the prospect of supply disruptions in oil, coal and natural gas markets remains high.”

The Agency also notes that large declines in oil, natural gas and coal prices from their highs in 2022 contributed to a slight recovery in global growth and a reduction in inflation in the first half of 2023, but after further declines in output of OPEC oil prices have risen more than 25% since the end of May. This development led to an increase in the contribution of energy to inflation in many G20 countries.

Inflation in G20 countries is forecast to decline from an average of 7.8% last year to 6% this year and further to 4.8% in 2024, while structural inflation in advanced G20 economies is forecast to decline to 4, 3% this year and to 2.8% next year. The reduction in inflation, according to the OECD, will be helped by the expected slowdown in the global economy due to the restrictive monetary and fiscal policies followed by most countries.

However, there are huge differences in performance between G20 countries, with inflation in China almost zero, Turkey over 50% and Argentina over 100%.

Inflation in goods is falling steadily, but not as much as inflation in services, which remains persistent, reflecting in part the larger contribution of labor costs in the services sector as well as the time it takes for price increases to be fully diffused energy in the two years 2021-22 in the prices of other products and services.

In the Eurozone, headline inflation is forecast at 5.5% this year and 3% in 2024, and structural inflation at 5.1% and 3.1%, respectively.