OECD raises forecast for global growth in 2024 to 3.2%

The OECD pointed out that the global economy remained resilient in the first half of this year, and that growth in many G20 countries has been relatively robust.

In parallel, global inflation continued to moderate, and the decline in consumer price inflation has provided a counterbalance to the negative impact from restrictive financial conditions and the uncertainty about the ongoing conflicts in the Middle East. By the end of 2025, inflation is projected to be back to target in most G20 countries, according to the report.

However, the organization warned that significant risks remain, as persisting geopolitical and trade tensions could damage investment sentiment and raise import prices. Economic growth may slow more sharply than expected in many countries with the cooling labour markets, and surprises on either the pace of economic growth or inflation could trigger disruptive corrections in financial markets.

There is room to lower policy interest rates, the OECD said, but monetary policy should remain prudent. Monetary policy rate reductions should continue, while the timing and scope of reductions need be carefully judged to ensure underlying inflationary pressures are durably contained, the organization suggested.

Besides, governments face significant fiscal challenges, the OECD warned in the report. These include higher debt and the additional spending pressures arising from ageing populations, climate change mitigation and adaptation measures, plans to raise defence spending, and the need to finance new reforms. Decisive fiscal actions are needed to contain spending and enhance revenues to improve the prospects for debt sustainability, it declared.

Annual GDP growth in the United States is expected to slow but be cushioned by monetary policy easing, with growth projected to be 2.6% in 2024 and 1.6% in 2025.

GDP growth in the Europe area is projected to be 0.7% in 2024 and 1.3% in 2025, with activity supported by a recovery in real incomes and an improvement in credit availability.

Growth in China is predicted to ease to 4.9% in 2024 and 4.5% in 2025, with additional policy stimulus offset by subdued consumer demand and the ongoing deep correction in the real estate sector, according to the report.

Faced with modest growth prospects ahead, ambitious policy reforms are needed in all countries to help strengthen the foundations for sustainable economic growth, the OECD suggested.

Note: Difference from May 2024 OECD Economic Outlook in percentage points, based on rounded figures. World and G20 aggregates use moving nominal GDP weights at purchasing power parities (PPPs). Revisions to PPP estimates affect the differences in the aggregates. Based on data available up to 19 September 2024.

1. The European Union is a full member of the G20, but the G20 aggregate only includes countries that are also members in their own right.

2. Data and projections for India are based on fiscal years starting in April.

Written by Nancy Zheng, zhengmm@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com