The OECD said there are signs that the global outlook has started to brighten, although growth remains modest.
“The impact of tighter monetary conditions continues, especially on housing and credit markets, but global activity is proving relatively resilient, inflation is falling faster than initially projected and private sector confidence is improving ”, says the report.
The OECD also highlighted that supply and demand imbalances in labor markets are decreasing, with unemployment remaining at or near record lows.
“Real yields have started to improve as inflation moderates and trade growth turns positive. Developments continue to diverge across countries, with softer results in many advanced economies, especially Europe, offset by strong growth in the United States and many emerging market economies.”
Global inflation in OECD countries is expected to fall to 5% in 2024, from 6.9% in 2023, and decline again to 3.4% in 2025. By the end of 2025, OECD inflation is projected to be close to most central bank targets of 2%. This is likely due to falling energy and goods prices, as well as tighter monetary policies.
Growth in UK and other major European economies estimated to be modest
Growth in the G20 and other developed nations is expected to lag significantly behind developing countries, with the UK estimated to have growth of just 0.4% in 2024, rising to 1% in 2025.
The euro area is estimated to register growth of 0.7% in 2024 and 1.5% in 2025, while France is also expected to register growth of 0.7% this year, but could possibly be left out of the area of the euro with growth of 1.3% in 2025.
Likewise, Italy is also expected to grow 0.7% this year, jumping to 1.2% in 2025.
Germany, long considered the “sick man” of Europe, is expected to have a disappointing performance this year too, with very modest growth of 0.2%. However, things could be looking significantly more positive for the country next year, with the OECD expecting a 1.1% increase.
On the other hand, India is expected to grow at a constant rate of 6.6% for both 2024 and 2025, while Indonesia could register an increase of 5.1% in 2024, rising to 5.2% in 2025.
However, China, which continues to struggle with the lingering effects of an uncertain economy, high cost of living and declining post-pandemic demand, is expected to rise 4.9% this year but just 4.5% next year.
In February 2024, the OECD unemployment rate stood at 4.9%, close to its lowest level since 2001.
OECD Secretary-General Mathias Cormann said in a statement that “the global economy has proven resilient, inflation has declined in line with the central bank’s targets and the risks to the outlook are becoming more balanced. We expect stable global growth for 2024 and 2025, although growth is projected to remain below its long-term average,” he said.
“Political action needs to ensure macroeconomic stability and improve medium-term growth prospects. Monetary policy must remain prudent, with scope to lower policy interest rates as inflation declines, fiscal policy must address growing pressures for debt sustainability, and policy reforms must boost innovation, investment and opportunities in the labor market, particularly for women, young people and older workers”, added Cromann.
2024-05-02 16:01:23