The latest economic outlook from the Organisation for Economic Co-operation and Development (OECD) projects sustained global economic growth, although the pace of growth remains uneven across countries and regions, and inflation continues to hover above target levels.
The outlook forecasts global GDP growth at 2.9% in 2024, with a slight increase to 3.0% in 2025. These figures align with OECD's previous projections in November 2023.
Meanwhile, Asia is expected to continue contributing the most to global growth in 2024-2025, as observed in 2023.
On the other hand, inflation is projected to gradually decline as cost pressures ease. General inflation in G20 countries is expected to decrease from 6.6% in 2024 to 3.8% in 2025. Core inflation in G20 advanced economies is forecasted to fall back to 2.5% in 2024 and 2.1% in 2025.
"The global economy has demonstrated resilience amidst high inflation over the past two years and the need for monetary policy tightening. Growth remains resilient, and we anticipate inflation to return to central bank targets by the end of 2025 in most G20 countries," said OECD Secretary-General Mathias Cormann, as quoted on Tuesday (2/6/2024).
"Monetary policies should remain cautious, although central banks may begin lowering interest rates this year, provided inflation continues to decline. Fiscal policies should rebuild fiscal space, through stronger efforts to restrain spending growth. In parallel, we need to work together to revive trade, enhance supply chain resilience, and address shared challenges, particularly climate change," he added.
Regarding growth, the United States (US) is projected to grow by 2.1% in 2024 and 1.7% in 2025. This projection is supported by consumers continuing to spend their savings during the Covid-19 pandemic and easier financial conditions.
In Europe, GDP growth is forecasted at 0.6% in 2024 and 1.3% in 2025. However, activity is predicted to remain weak in the near term amid tight credit conditions, before picking up as real incomes strengthen.
Japan is projected to grow by 1.0% in both 2024 and 2025, primarily driven by private consumption and business investment. China is expected to grow by 4.7% in 2024 and 4.2% in 2025, reflecting weak consumer demand and structural pressures in the property market.
Additionally, the OECD Outlook highlights several challenges. The organization cites geopolitical tensions as a major source of uncertainty, which is increasing due to escalating conflicts in the Middle East.
Threats to shipping in the Red Sea have also raised shipping costs and extended supplier delivery times. If these trends persist, they could result in new price pressures in the goods sector and increased risks.
OECD estimates indicate that a doubling of shipping costs, if sustained, would add 0.4 percentage points to consumer price inflation in the OECD after around one year.