Global economic outlook uncertain; growth to slow: OECD

The global economy has been resilient in 2024, but some signs of weakness are appearing against a backdrop of slower growth, lingering inflation and an uncertain policy environment, it noted.

GDP growth in the United States is projected at 2.2 per cent this year before slowing to 1.6 per cent in the next. In the euro area, growth is projected to be 1 per cent in 2025 and 1.2 per cent in 2026.

China’s growth is projected to slow from 4.8 per cent this year to 4.4 per cent in the next.

Inflation is projected to be higher than previously expected, although still moderating as economic growth softens.

Goods price inflation has begun picking up in some countries, although from low levels.

Annual headline inflation in G20 economies is projected at 3.8 per cent in 2025 and 3.2 per cent in 2026.

These projections have been revised upwards by 0.3 percentage points compared to OCED’s Economic Outlook in December.

“Increasing trade restrictions will contribute to higher costs both for production and consumption. It remains essential to ensure a well-functioning, rules-based international trading system and to keep markets open,” OECD secretary general Mathias Cormann said.

The Outlook highlights a range of risks, starting with the concern that further trade fragmentation could harm global growth prospects.

The Outlook also draws attention to the risk of macroeconomic volatility. An unexpected downturn, policy change or deviation from the projected disinflation path could trigger market corrections, significant capital outflows, and exchange rate fluctuations, particularly in emerging markets.

High public debt levels and elevated asset valuations further heighten these risks.

Decisive fiscal actions are needed to ensure debt sustainability, preserve room for reacting to future shocks and generate resources to meet large impending spending pressures, it recommends.

Stronger efforts are needed to reallocate spending towards activities that support longer-term growth, set within credible medium-term adjustment paths tailored to country-specific circumstances, it adds.

ALCHEMPro News Desk (DS)