The global economy is on course to hold up better this year than expected only a few months ago as an improved outlook in the United States offsets euro zone weakness, the OECD said on Monday.
World economic growth is expected to ease from 3.1 per cent in 2023 to 2.9 per cent this year, better than the 2.7 per cent expected in November in the Organisation for Economic Cooperation and Development’s last outlook.
In an update of its forecasts for major economies, the Paris-based OECD left its 2025 global estimate unchanged at 3.0 per cent, when growth is expected to be boosted by major central banks rate cuts as inflation pressures subside.
The U.S. economy was expected to grow 2.1 per cent in 2024 and 1.7 per cent in 2025 as lower inflation boosted wage growth and triggers interest rate cuts, the OECD said, raising its 2024 forecast from 1.5 per cent previously and leaving 2025 unchanged.
As China contends with real estate market wobbles and weak consumer confidence, its growth was seen slowing from 5.2 per cent in 2023 to 4.7 per cent in 2024 and to 4.2 per cent in 2025, all unchanged from November forecasts.
With a slowdown in Germany weighing on the broader euro area, the shared currency bloc’s outlook had worsened since November, with its economy now expected pick up from 0.5 per cent last year to only to 0.6 per cent this year, down from 0.9 per cent previously. In 2025, it was seen growing 1.3 per cent, revised down from 1.5 per cent.
While economic outlooks diverged among the major economies, inflation was cooling faster than expected since November in both the United States and euro area while unchanged in China.
That paved the way for rate cuts with the U.S. Federal Reserve expected to move in the second quarter and the European Central Bank to follow in the third quarter.
However, attacks on Red Sea shipping lanes could add to inflationary pressures, albeit modestly, the OECD said.
It estimated that if a surge in shipping costs persisted annual OECD import price inflation could increase by close to 5 percentage points, adding 0.4 percentage points to consumer price inflation after about a year.