OECD Secretary General Mathias Cormann

OECD does not anticipate growth to edge up until 2025

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World growth is set to remain modest, with the impact of the necessary monetary policy tightening, weak trade and lower business and consumer confidence being increasingly felt, according to the OECD’s latest Economic Outlook.

The Outlook projects global GDP growth of 2.7% in 2024 and a slight improvement to 3.0% in 2025. Asia is expected to continue to account for the bulk of global growth in 2024-25, as it has in 2023.

Consumer price inflation is expected to continue to ease gradually back towards central bank targets in most economies by 2025, as cost pressures moderate. Consumer price inflation in OECD countries is expected to decline from 7.0% in 2023 to 5.2% in 2024 and 3.8% in 2025.

(Source: OECD)

GDP growth in the United States is projected at 1.5% in 2024, and then picking up slightly to 1.7% in 2025 as monetary policy is expected to ease. In the euro area GDP growth is projected at 0.9% in 2024 and 1.5% in 2025. China is expected to grow at 4.7% in 2024 and 4.2% in 2025 on the back of ongoing stresses in the real estate sector and continued high household saving rates.

“The global economy continues to confront the challenges of both low growth and elevated inflation…We expect that inflation will be back at central bank targets by 2025 in most economies,” OECD Secretary-General Mathias Cormann said. “Over the longer term, our projections show a significant rise in government debt, in part as a result of a further slowdown in growth.”

The Outlook highlights a range of risks. Geopolitical tensions remain a key source of uncertainty and have risen further as a result of the evolving conflict in Israel-Palestine. Amid heightened geopolitical tensions and a longer-term decline in the trade intensity of growth, the anticipated cyclical pick-up in trade growth could fail to materialise, according to the Paris-based organisation.

Still, economic forecasting is an inexact science. As in 2023, forecasts may well fall wide of the mark again.