OECD raises global growth forecast to 3.2% in 2024

The Organization for Economic Co-operation and Development (OECD) has updated its global economic outlook, forecasting growth to stabilize at 3.2% for both this year and next. This represents a slight increase from its previous forecast of 3.1% for 2024, while the forecast for 2025 remains unchanged.

The OECD attributes this stability to the fading effects of previous interest rate hikes by central banks and lower inflation expected to boost household incomes. The organisation also notes that if the recent decline in oil prices continues, global inflation could fall by 0.5 percentage points over the next year.

In terms of interest rates, the OECD expects the US Federal Reserve to cut its key interest rate to 3.5% by the end of 2025, down from the current level of 4.75%-5%. Similarly, the European Central Bank is expected to cut its interest rate to 2.25% from 3.5%.

The US economy is expected to slow from 2.6% growth this year to 1.6% in 2025, a slight downgrade from May’s forecast of 1.8%. Interest rate cuts are expected to help mitigate this slowdown. Meanwhile, China’s growth is expected to slow from 4.9% in 2024 to 4.5% in 2025 due to a combination of government stimulus spending, weak consumer demand and ongoing problems in the property sector. The eurozone is expected to see a significant increase in growth from 0.7% this year to 1.3% next year, supported by incomes rising faster than inflation. In addition, the OECD has revised its growth forecasts for the UK economy upward, with growth set to expand by 1.1% in 2024 and 1.2% in 2025, an improvement from May’s forecast of 0.4% for this year and 1% next year. These forecasts come at a time when the global economy is facing a variety of challenges, with the latest OECD forecasts offering a cautiously optimistic outlook for the near future.