Here are the key points from the report:
- Global Growth Forecast: The OECD has revised its global economic forecast for 2024, projecting a growth rate of 2.7%. This is a downward revision of 0.2% from its June estimate. In 2023, the global economy is expected to expand by 3%, which is already considered “sub-par.”
- Causes of Anemic Growth: The OECD attributes this anaemic growth to rising interest rates, which are squeezing business activity. Additionally, China’s recovery from the COVID-19 pandemic has been weaker than anticipated, contributing to the subdued global economic outlook.
- Challenges of Inflation: High inflation is a significant concern, and the OECD chief economist, Clare Lombardelli, highlighted it as a considerable challenge. Inflation is causing difficulties for the global economy, and the organization believes that it is facing the dual challenges of inflation and low growth.
- Impact of Interest Rate Hikes: The report indicates that central banks’ efforts to curb inflation through interest rate hikes are taking a toll on economies worldwide. These hikes are expected to impact global economic conditions further negatively.
- Limited Scope for Rate Cuts: Due to persistent price growth and inflation, there is narrow room for central banks to reduce interest rates until well into 2024.
- Factors Affecting Growth: While the year started with stronger-than-expected growth in 2023, factors such as tighter monetary policy, declining business and consumer confidence, and the fading rebound of China’s economy are expected to moderate global growth.
- Euro Area and Germany: The OECD has also lowered its growth forecast for the euro area for the current year. Furthermore, it predicts that Germany’s economy will contract by 0.2% in 2023, making it the only G20 country, aside from Argentina, to face a recession.
- Impact of Oil Prices: A surge in oil prices has contributed to inflation in many countries, particularly those heavily reliant on crude oil imports. The OECD has identified oil price volatility as a risk factor that could continue to affect global economic conditions. Crude oil prices have risen significantly since May, impacting household budgets.
In summary, the OECD’s Economic Outlook report paints a grim picture of the global economy, with subdued growth prospects, inflationary pressures, and challenges posed by rising interest rates. The organization’s chief economist emphasized the need to address the dual challenges of inflation and low growth. These economic conditions are a cause for concern and will likely impact governments, businesses, and individuals around the world.
