OECD expects global GDP to grow by 2.9% in 2023, followed by a slight deceleration to 2.7% in 2024
Asia is projected to continue driving the bulk of global growth
The latest Economic Outlook issued by the Paris-headquartered Organisation for Economic Co-operation and Development (OECD) expects the global business landscape to experience modest growth amid ongoing challenges, even as the impact of necessary monetary policy tightening, coupled with weak trade and reduced confidence among businesses and consumers, is becoming increasingly evident.
According to the new report, global GDP is projected to grow by 2.9% in 2023, followed by a slight deceleration to 2.7% in 2024, with a modest recovery to 3.0% in 2025.
Notably, Asia is anticipated to continue driving the bulk of global growth during 2025, maintaining its pivotal role in the economic landscape.
Consumer price inflation is forecasted to gradually ease towards central bank targets in most economies by 2025, as cost pressures moderate, according to the report.
In OECD countries, consumer price inflation is expected to decrease from 7.0% in 2023 to 5.2% in 2024 and 3.8% in 2025.
As per the report, the US is predicted to experience GDP growth of 2.4% in 2023, followed by a slowdown to 1.5% in 2024, with a slight uptick to 1.7% in 2025 as monetary policy is expected to ease.
In the eurozone, which faced challenges from Russia’s conflict with Ukraine and energy price shocks, GDP growth is projected to be 0.6% in 2023, rising to 0.9% in 2024 and 1.5% in 2025.
Meanwhile, China is expected to grow at a rate of 5.2% in the current year, with a subsequent decrease to 4.7% in 2024 and 4.2% in 2025, influenced by ongoing stresses in the real estate sector and high household saving rates.
Mathias Cormann, OECD Secretary-General, emphasised the global economy’s dual challenge of low growth and elevated inflation.
He noted a mild slowdown in 2024 due to necessary monetary policy tightening. Cormann also highlighted the importance of rebuilding fiscal space by boosting competition, investment, and skills while promoting multilateral cooperation to address shared challenges like revitalising global trade flows and managing climate change.
The OECD Economic Outlook identifies geopolitical tensions as a critical source of uncertainty, particularly in the aftermath of evolving conflicts, with the report underscoring the need for continued policies to reduce inflation, revitalise global trade, and adapt fiscal policies to meet long-term challenges.
The effects of monetary policy tightening since early 2022 are becoming increasingly visible, with policy interest rates reaching or nearing their peak in most economies.
The report suggests maintaining a restrictive monetary policy until clear signs of a sustained reduction in inflationary pressures emerge. Rate reductions in major advanced economies are not expected until well into 2024 or even 2025.
The study also emphasises the importance of ensuring open markets to facilitate digital and green transitions alongside fiscal policies preparing for long-term spending challenges.
In context to the report, Clare Lombardelli, OECD Chief Economist, said: “Governments need to start confronting the mounting challenges that public finances face, particularly from ageing populations and climate change.
“Governments need to spend smarter, and policymakers need to contain current and future fiscal pressures while preserving investment and rebuilding buffers to respond to future shocks,” Lombardelli added
Featured image: The US is predicted to experience GDP growth of 2.4% in 2023. Image: Dominik Lückmann