Global Economic Growth Projected at 3.2% in 2024 – OECD — Evening Brief – 10.01.24
Global economic growth is expected to stabilize around 3.2% this year and next, with lower inflation, higher real earnings, and less restrictive monetary policy in many nations supporting demand, according to the most recent economic outlook update by the Organization for Economic Co-operation and Development (OECD).
The OECD boosted its prediction for global GDP growth in 2024 to 3.2% from 3.1% previously, while leaving the 2025 outlook unchanged.
The global economy has remained resilient in the first half of 2024, with falling inflation supporting household spending and offsetting the negative impact of tighter financial conditions and increasing geopolitical concerns, according to the OECD.
Growth in the U.S. accelerated in the second quarter of this year, with private consumption boosted by real wage growth, which were aided in part by declining inflation. However, the OECD predicts that economic growth will decline to 1.6% in 2025, down from 2.6% this year, but will be cushioned by monetary policy easing.
In the Eurozone, economic growth is expected to nearly double to 1.3% in 2025 from 0.7% in 2024, while growth in China is expected to slow to 4.5% in 2025 from 4.9% in 2024 as policy stimulus is offset by subdued consumer demand and an ongoing deep correction in the country’s real estate sector.
Inflation is expected to be back to target in most G20 economies by the end of 2025. Headline inflation is projected to decline further to 3.3% in 2025 from 5.4% in 2024. Core inflation is expected to ease to 2.1% from 2.7%.
“The lagged impact of monetary policy tightening in advanced economies on growth has begun to moderate, and further monetary policy easing as inflation declines will support interest-rate-sensitive expenditures in 2025,” the report said. The decline in inflation is also expected to provide a further boost to real income growth and a tailwind to private consumption in many economies.
As inflation moderates and labor market pressures ease further, monetary policy rate cuts should continue, the OECD concluded, cautioning that major central banks should take a “prudent” approach to cutting interest rates.