Global GDP to grow 3.1% in 2024: OECD

In February, the OECD unemployment rate stood at 4.9 per cent, nearing its lowest levels since 2001, while real incomes experienced growth in many OECD countries, accompanied by a shift towards positive trade growth. Discrepancies persist among countries, with weaker outcomes observed in several advanced economies, notably in Europe, contrasted by robust growth in the US and emerging market economies.

Headline inflation in the OECD is anticipated to gradually ease, starting from 6.9 per cent in 2023 to 5 per cent in 2024 and further down to 3.4 per cent in 2025, supported by tight monetary policy and fading goods and energy price pressures. By the end of 2025, inflation is expected to return to central bank targets in most major economies, as per the OECD.

In terms of specific regional projections, the US is forecasted to achieve a GDP growth rate of 2.6 per cent in 2024, before moderating to 1.8 per cent in 2025, as the economy adjusts to high borrowing costs and subdued domestic demand. Meanwhile, the euro area, which faced stagnation in the fourth quarter of 2023, is expected to witness a gradual rebound, driven by factors such as a recovery in real household incomes, tight labour markets, and reductions in policy interest rates. euro area GDP growth is projected at 0.7 per cent in 2024 and 1.5 per cent in 2025.

Japan's growth trajectory is expected to improve steadily, with domestic demand supported by stronger real wage growth, continued accommodative monetary policy, and temporary tax cuts. GDP is projected to expand by 0.5 per cent in 2024 and 1.1 per cent in 2025.

China, while likely to experience a moderate slowdown, is anticipated to maintain GDP growth rates of 4.9 per cent in 2024 and 4.5 per cent in 2025, supported by fiscal stimulus measures and export activities.

However, significant uncertainties persist. Inflationary pressures may persist longer than expected, leading to slower reductions in policy interest rates and heightened financial vulnerabilities. Additionally, challenges in China, particularly related to the property market, could dampen growth, alongside geopolitical tensions that pose risks to activity and inflation, especially in the Middle East.

Despite these challenges, the outlook underscores the importance of policy measures to ensure a durable reduction in inflation, establish a sustainable budgetary path to address fiscal pressures, and undertake reforms that enhance prospects for medium-term growth. Prudent monetary policy is advised, with a need for continued restraint to contain inflationary pressures effectively. Governments are urged to address rising fiscal challenges by containing spending growth, improving spending efficiency, reallocating resources to support opportunities and growth, and optimising tax revenues.

“The global economy has proved resilient, inflation has declined within sight of central bank targets, and risks to the outlook are becoming more balanced. We expect steady global growth for 2024 and 2025, though growth is projected to remain below its longer-run average,” said OECD Secretary-General Mathias Cormann. “Policy action needs to ensure macroeconomic stability and improve medium-term growth prospects. Monetary policy should remain prudent, with scope to lower policy interest rates as inflation declines, fiscal policy needs to address rising pressures to debt sustainability, and policy reforms should boost innovation, investment and opportunities in the labour market particularly for women, young people and older workers.”

Fibre2Fashion News Desk (DP)