Global Economy Shows Signs of Resilience, OECD Reports
The global economy is performing better than expected, according to the Organisation for Economic Co-operation and Development (OECD). In its latest Economic Outlook, the OECD revised its growth forecasts upwards, citing resilient US activity and faster-than-anticipated inflation convergence with central bank targets.
The global economy is projected to maintain its 2023 growth rate of 3.1% and experience a slight increase to 3.2% in 2025. This is an improvement from the February forecast of 2.9% growth this year and 3% in 2025.
The OECD attributes this positive revision to a faster-than-expected decline in inflation. This has paved the way for major central banks to begin cutting interest rates in the second half of the year, which will boost consumer incomes.
However, the report also highlights significant disparities in recovery speeds across different regions. While the United States is experiencing robust growth with a revised forecast of 2.6% this year and 1.8% in 2025, Europe and Japan are lagging behind.
China's economy, bolstered by fiscal stimulus, is also expected to outperform previous estimates, with growth projections of 4.9% in 2024 and 4.5% in 2025.
The eurozone's growth is projected to pick up from 0.7% this year to 1.5% in 2025, driven by lower inflation and subsequent rate cuts. However, Germany's weakness continues to weigh on the region's overall performance.
The UK's outlook is one of the few to be downgraded, with growth now forecast at only 0.4% this year compared to the previous estimate of 0.7%. However, growth is expected to pick up to 1% in 2025 as interest rates begin to decline.
In Japan, income gains, accommodative monetary policy, and temporary tax cuts are expected to contribute to an acceleration in growth from 0.5% in 2024 to 1.1% in 2025.