May 2 2024: The OECD announced on Thursday that the global economy is growing faster than previously anticipated, driven by resilient economic activity in the United States. Additionally, inflation is showing signs of aligning more rapidly with central banks’ targets, prompting the organization to upgrade its outlook.
The OECD now projects that the global economy will maintain the 3.1% growth rate observed last year and slightly accelerate to 3.2% next year. This marks an improvement from its February forecasts, which predicted growth of 2.9% for this year and 3% for 2025.
According to the latest Economic Outlook from the OECD, the quicker decline in inflation has set the stage for major central banks to initiate rate cuts in the latter half of the year. This development is also contributing to increased income for consumers.
However, the pace of recoveries varies significantly across regions, with the OECD cautioning that Europe and Japan are experiencing lingering sluggishness. In contrast, the United States stands out with an upgraded growth forecast of 2.6% for this year, up from the previous estimate of 2.1%. Next year, U.S. growth is expected to moderate slightly to 1.8%, compared to 1.7% forecasted in February.
China’s economy is also anticipated to grow faster than previously predicted, fueled by fiscal stimulus. The growth forecast for China is now 4.9% in 2024 and 4.5% in 2025, up from the earlier estimates of 4.7% and 4.2% respectively.
While Germany’s weakness continues to impact the broader eurozone, the bloc’s growth outlook is improving. The OECD projects eurozone growth to rise from 0.7% this year to 1.5% next year, supported by lower inflation and potential rate cuts. This represents an upgrade from previous forecasts of 0.6% growth for this year and 1.3% for 2025.
Conversely, the outlook for Britain has been downgraded, with the OECD now forecasting 0.4% growth for this year, down from the previous estimate of 0.7%. However, growth is expected to pick up to 1% in 2025 as interest rates are anticipated to decline starting from the third quarter of this year, compared to the earlier expectation of 1.2% growth in 2025.
In Japan, income growth, accommodative monetary policies, and temporary tax reductions are projected to boost the growth rate from 0.5% in 2024 to 1.1% in 2025. This marks an improvement from the previous forecast of 1% growth for both years.
