The OECD has revised down several indicators of the global economy, marking increased pessimism for 2024
GLOBAL ISSUES
OECD predicts weaker growth and continued inflation for 2024
Growth in the global economy is expected to remain "sub-par" next year, according to the Organization for Economic Cooperation and Development (OECD) which cut its forecast for 2024 from 2.9% to 2.7% on Tuesday.
It also predicted that inflation would remain above the goals set by central banks around the world that have gone on a campaign of interest rate hikes in an attempt to tame rising costs.
At the same time, the OECD revised its global growth expectations for 2023 up to 3.0%, from the previous forecast of 2.7%.
At the same time, the OECD revised its global growth expectations for 2023 up to 3.0%, from the previous forecast of 2.7%.
What did the OECD say?
"After a stronger-than-expected start to 2023, helped by lower energy prices and the reopening of China, global growth is expected to moderate," the OECD said.
"The impact of tighter monetary policy is becoming increasingly visible, business and consumer confidence have turned down, and the rebound in China has faded."
The European Central Bank raised interest rates to a record high last week as it tries to bring inflation down to its target of just 2%.
- According to the European Commission, inflation in the Eurozone was at 5.3% in August.
"Even if policy rates are not raised further, the effects of past rises will continue to work their way through economies for some time."
Not all countries faring the same
Fears over a "sharper-than-expected slowdown in China" were part of the reason for the OECD's increased pessimism about the global economy.
- It predicted that China's growth would fall from 5.1% this year to 4.6% next year.
- The Eurozone was forecast to see increased growth next year, up from 0.6% to 1.1%, but with both figures down from earlier forecasts as the German economy, the biggest in the EU, struggles.
While all rich countries have been struggling with inflation, the UK is expected to have the highest overall rate of inflation for 2023: 7.2% compared to the 6.9% that the OECD had previously predicted.
Germany and France were forecast to have inflation rates of 6.1% and 5.8% respectively for 2023, with both figures down from the previous forecast.
Germany and France were forecast to have inflation rates of 6.1% and 5.8% respectively for 2023, with both figures down from the previous forecast.
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Growth
in the global economy will remain anemic as rising interest rates
squeeze business activity, while China's recovery from the pandemic has
proved weaker than expected, the Organization for Economic Cooperation
and Development (OECD) announced on Tuesday.
"While high inflation continues to unwind the world economy remains in a difficult place," OECD chief economist Clare Lombardelli told reporters on Tuesday. "We're confronting the double challenges of inflation and low growth."
- In its latest Economic Outlook report, the OECD revised downwards its global economic forecast for 2024, expecting growth to slide to 2.7% next year, down by 0.2% from its June estimate, after an already "sub-par" expansion of 3% this year.
"While high inflation continues to unwind the world economy remains in a difficult place," OECD chief economist Clare Lombardelli told reporters on Tuesday. "We're confronting the double challenges of inflation and low growth."
- Interest-rate hikes aimed at curbing inflation are taking their toll and are expected to have a further negative impact on economies worldwide, the OECD warned. Meanwhile price growth shows little sign of easing, leaving "limited scope for any rate cuts until well into 2024."
"After a stronger-than-expected start to 2023, helped by lower
energy prices and the reopening of China, global growth is expected to
moderate," the OECD said. "The impact of tighter monetary
policy is becoming increasingly visible, business and consumer
confidence have turned down, and the rebound in China has faded."
The OECD also slashed its growth forecast for the euro area for this year and warned that Germany's economy would contract by 0.2% in 2023. This would make the EU's top economy the only G20 state except Argentina to face a recession.
A surge in oil prices has also fueled inflation in many countries, in particular those dependent on crude imports, Lombardelli said.
"Oil prices will continue to be potentially volatile through this period. That's why we've highlighted it as one of the risks," she noted. Crude prices have soared by 25% since May and will keep weighing on household budgets, the economist warned.
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