The Organization for Economic Cooperation and Development (OECD) has released its latest Economic Outlook, predicting a modest global GDP growth of 2.9% in 2023. However, the report warns of challenges such as necessary monetary policy tightening, weak trade, and declining business and consumer confidence. Asia is anticipated to drive global growth in 2024-25.
KEY POINTS
- Global GDP growth expected to slow to 2.7% in 2024 before a slight improvement to 3.0% in 2025.
- Consumer price inflation projected to ease, declining from 7.0% in 2023 to 3.8% in 2025 in OECD countries.
- U.S. GDP growth at 2.4% in 2023, slowing to 1.5% in 2024 and picking up slightly to 1.7% in 2025.
- Euro area GDP growth projected at 0.6% in 2023, rising to 1.5% in 2025 after challenges from Russia’s aggression and energy price shock.
- China’s growth expected at 5.2% in 2023, decreasing to 4.7% in 2024 and 4.2% in 2025 due to real estate stresses and high household saving rates.
OECD Secretary-General Mathias Cormann emphasizes the global economy’s dual challenges of low growth and elevated inflation
He expects inflation to return to central bank targets by 2025, urging stronger efforts to rebuild fiscal space through boosting competition, investment, skills, and international cooperation.
RISKS AND POLICY RECOMMENDATIONS
Geopolitical tensions, including the conflict following Hamas’ attacks on Israel, pose uncertainties.
Policy recommendations include continuing efforts to bring down inflation, reviving global trade, and adapting fiscal policy to long-term challenges.
MONETARY AND FISCAL POLICY
- Effects of monetary policy tightening since early 2022 are visible, with policy interest rates at or close to their peak.
- No rate reductions expected in major advanced economies until well into 2024 or 2025.
- Fiscal policy should address long-term spending challenges, considering aging populations and climate change.
OECD Chief Economist’s Perspective: Clare Lombardelli emphasizes the need for governments to confront fiscal challenges, spending smarter while preserving investment and rebuilding buffers for future shocks.
The Outlook concludes with a call for concerted efforts to address global challenges and promote sustainable economic growth.