Global economic growth to continue with inflation easing: OECD

The global gross domestic product (GDP) will grow by 2.9 per cent in 2024, with a slight improvement to 3 per cent anticipated in 2025, as per OECD's projections. This forecast aligns closely with the OECD's previous projections made in November 2023. Asia is poised to continue as the primary contributor to global growth in the coming years, replicating its significant role from 2023.

A gradual reduction in inflation is anticipated, as cost pressures begin to subside. Headline inflation among G20 nations is expected to fall from 6.6 per cent in 2024 to 3.8 per cent in 2025. Similarly, core inflation within the advanced economies of the G20 is projected to decrease to 2.5 per cent in 2024, further dropping to 2.1 per cent in 2025, as per the outlook.

Country-specific growth forecasts highlight variances across major economies. The US is projected to experience a growth rate of 2.1 per cent in 2024 and 1.7 per cent in 2025, buoyed by continued consumer spending of savings accumulated during the COVID-19 pandemic and more relaxed financial conditions. The euro area is forecast to see subdued activity in the near term, with GDP growth at 0.6 per cent in 2024 and an improvement to 1.3 per cent in 2025, as real incomes start to strengthen. Japan's economy is expected to grow by 1.0 per cent in both 2024 and 2025, driven by private consumption and business investment. Meanwhile, China's growth is projected at 4.7 per cent in 2024 and 4.2 per cent in 2025, marking a slower pace compared to the 25 years preceding the pandemic, attributed to weak consumer demand and structural issues in its property markets.

The outlook also addresses various challenges and uncertainties facing the global economy, notably increased geopolitical tensions and their impact on shipping costs and supplier delivery times due to threats in the Red Sea. An escalation could potentially disrupt the anticipated cyclical recovery and contribute to renewed inflationary pressures in goods sectors.

The OECD advises that monetary policy should remain cautious to ensure a sustainable reduction in inflationary pressures, suggesting that policy interest rates could be lowered in most major economies this year, contingent on the continuation of disinflation. However, the pace of rate reductions should be data-dependent and will likely vary across different economies.

Furthermore, the outlook underscores the importance of government action in response to mounting fiscal pressures, urging adaptations in fiscal policy to address long-term growth challenges such as high public debt and climate change.

ALCHEMPro News Desk (DP)