Jakarta, CNBC Indonesia - The Organisation for Economic Co-operation\nand Development (OECD) forecasts that the inflation rate in G20\ncountries will rise to 4% this year. This is driven by increases in\nenergy prices, particularly oil and gas, due to the effects of the\ncessation of shipments through the Strait of Hormuz and the closure and\ndamage to several energy infrastructures resulting from the war in the\nMiddle East.<\/p>\n
\u201cThis increases costs, suppresses demand, and adds inflationary\npressure,\u201d stated the OECD in its latest Economic Outlook, Interim\nReport titled Testing Resilience, quoted on Monday (30\/3\/2026).<\/p>\n
According to the OECD in its report, potential supply disruptions\ncould be exacerbated by Europe\u2019s currently relatively low gas reserves\nand difficulties in exporting much of the world\u2019s excess crude oil\nproduction capacity, which is mainly located in Saudi Arabia. In\naddition to further price surges, energy shortages could burden\nproduction activities in several net energy importers, particularly\nAsian countries such as Japan and South Korea.<\/p>\n
The OECD emphasises that further disruptions to trade in the Persian\nGulf could also negatively impact a broader range of products in the\nglobal supply chain.<\/p>\n
\u201cFor instance, sustained constraints on fertiliser supplies could\nraise global food prices, with potentially serious implications for\nhousehold finances and inflation expectations,\u201d it stated.<\/p>\n
Moreover, reduced supplies of sulphur, helium, or aluminium could\nhinder production in various industries.<\/p>\n
The OECD also provides recommendations for policymakers. First, it\nreminds central banks to remain vigilant and monitor shifts in the\nbalance of risks surrounding economic and financial developments to\nensure that underlying inflationary pressures are sustainably\ncontrolled.<\/p>\n
\u201cGlobal energy price increases triggered by current supply conditions\ncan be overlooked as long as inflation expectations remain anchored, but\npolicy adjustments may be needed if there are signs of broader price\npressures or weaker labour market conditions,\u201d wrote the OECD.<\/p>\n
However, on the other hand, the OECD warns that changes in heightened\nglobal risk aversion due to the evolving conflict in the Middle East and\nrelated currency movements could also affect policy assessments in\nemerging countries.<\/p>\n
Careful calibration may be required to balance persistent inflation\nrisks with recession risks from significant growth slowdowns.<\/p>\n
Second, the OECD emphasises that rising energy prices are reigniting\ninterest in measures to support households and businesses. Any measures\nshould be temporary and targeted at those most in need, while still\npreserving incentives to reduce energy use.<\/p>\n
The OECD assesses that broad subsidies and transfers, tax reductions,\nand price caps are easier to implement quickly but weaken incentives to\nreduce energy use and incur higher fiscal costs.<\/p>\n
Furthermore, the OECD reveals that government budgets are under\npressure from high debt burdens and demands for new spending, including\nincreased defence expenditures in many countries and the long-term costs\nof population ageing and climate change.<\/p>\n
Therefore, stronger efforts to control and reallocate spending,\nimprove public sector efficiency, and increase revenues are needed,\nwhich the OECD hopes can be established as a credible and specific\nmedium-term adjustment strategy.<\/p>\n
Finally, the OECD asserts that actions to reduce dependence on\nimported fossil fuels and accelerate energy efficiency measures, such as\nincreasing clean energy capacity, modernising electricity grids, and\nintroducing expedited permitting procedures, can lower exposure to\ngeopolitical shocks, reduce cost pressures for households and\nbusinesses, and support long-term resilience.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/g20-countries-hit-by-iran-war-effects-inflation-could-reach-4-1774835478", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }