OECD – Economic Outlook, Feb 2024

The global economy experienced resilient growth in 2023, with inflation declining faster than expected. However, growth varied among countries, with the United States and many emerging-market economies experiencing strong growth while most European countries experienced a slowdown. Recent indicators suggest a moderation of growth, as tighter financial conditions continue to impact credit and housing markets, and global trade remains subdued. Attacks on ships in the Red Sea have raised shipping costs and disrupted production schedules, leading to increased price pressures. The OECD projects global GDP growth to ease to 2.9% in 2024, before recovering to 3.0% in 2025 as financial conditions improve. The United States is expected to maintain growth supported by household spending and strong labor market conditions, but at a slower pace of 2.1% in 2024 and 1.7% in 2025. Euro area GDP growth is projected to be 0.6% in 2024 and 1.3% in 2025, hindered by tight credit conditions before picking up due to stronger real incomes. China's growth is expected to ease to 4.7% in 2024 and 4.2% in 2025, despite additional policy stimulus, due to subdued consumer demand, high debt, and a weak property market. Inflation is projected to return to target in most G20 countries by the end of 2025. Headline inflation in G20 economies is expected to decrease from 6.6% in 2024 to 3.8% in 2025, with core inflation in G20 advanced economies easing to 2.5% in 2024 and 2.1% in 2025. However, there are concerns that underlying price pressures are not fully contained, as unit labor cost growth remains above levels compatible with medium-term inflation objectives. High geopolitical tensions and persisting service price pressures pose risks to activity and inflation. Monetary policy needs to remain cautious to ensure that inflationary pressures are controlled. Governments face fiscal challenges from rising debt burdens and future spending pressures. Efforts to contain spending growth and establish sustainable fiscal frameworks are necessary. Policy reforms are also needed to strengthen education, skills development, and labor and product markets to enhance investment and labor force participation. International cooperation is crucial to revive global trade, accelerate progress towards decarbonization, and alleviate debt burdens in lower-income countries.