OECD: 2024 World Economy 11/29 06:56
WASHINGTON (AP) -- The global economy, which has proved surprisingly
resilient this year, is expected to falter next year under the strain of wars,
still-elevated inflation and continued high interest rates.
The Paris-based Organization for Economic Cooperation and Development
estimated Wednesday that international growth would slow to 2.7% in 2024 from
an expected 2.9% pace this year. That would amount to the slowest calendar-year
growth since the pandemic year of 2020.
Despite the gloomier outlook, the organization is "projecting that
recessions will be avoided almost everywhere," OECD Secretary-General Mathias
Cormann said at a news conference.
However, he added, there are risks that inflation will stay persistently
high and that the Israel-Hamas conflict and Russia's war in Ukraine could
affect prices for commodities, such as oil or grain.
A key factor in the slowdown is that the OECD expects the world's two
biggest economies, the United States and China, to decelerate next year. The
U.S. economy is forecast to expand just 1.5% in 2024, from 2.4% in 2023, as the
Federal Reserve's interest rate increases -- 11 of them since March 2022 --
continue to restrain growth.
The Fed's higher rates have made borrowing far more expensive for consumers
and businesses and, in the process, have helped slow inflation from its
four-decade peak in 2022. The OECD foresees U.S. inflation dropping from 3.9%
this year to 2.8% in 2024 and 2.2% in 2025, just above the Fed's 2% target
The Chinese economy, beset by a destructive real estate crisis, rising
unemployment and slowing exports, is expected to expand 4.7% in 2024, down from
5.2% this year. China's "consumption growth will likely remain subdued due to
increased precautionary savings, gloomier prospects for employment creation and
heightened uncertainty," the OECD said.
Also likely to contribute to a global slowdown are the 20 countries in the
European Union that share the euro currency. They have been hurt by heightened
interest rates and by the jump in energy prices that followed Russia's invasion
The OECD expects the collective growth of the eurozone to amount to 0.9%
next year -- weak but still an improvement over a predicted 0.6% growth in 2023.
"A key takeaway today is the stronger outlook for the U.S., which we've
revised up for 2024, but a weaker outlook for Europe, which we've revised
down," OECD chief economist Clare Lombardelli told reporters.
She pointed to the impact on Europe from the spike in energy prices last
year after Russia cut off most of its natural gas to the continent. That sent
costs soaring for households and businesses, driving a cost-of-living crisis
and hurting factories in places like Germany.
The world economy has endured one shock after another since early 2020 ---
the eruption of COVID-19, a resurgence of inflation as the rebound from the
pandemic showed unexpected strength, the war in Ukraine and painfully high
borrowing rates as central banks acted aggressively to combat the acceleration
of consumer prices.
Yet through it all, economic expansion has proved unexpectedly sturdy. A
year ago, the OECD had predicted global growth of 2.2% for 2023. That forecast
proved too pessimistic. Now, the organization warns, the respite may be over.
"Growth has been stronger than expected so far in 2023," the OECD said in
its 221-page report, "but is now moderating as the impact of tighter financial
conditions, weak trade growth and lower business and consumer confidence is
Moreover, the OECD warned, the world economy is confronting new risks
resulting from heightened geopolitical tensions amid the Israel-Hamas war --
"particularly if the conflict were to broaden."
"This could result in significant disruptions to energy markets and major
trade routes," it said.