PARIS – The Organization for Economic Co-operation and Development (OECD) said the outlook for the global economy is improving, with growth becoming more resilient and inflation cooling in many countries faster than previously expected.
The Paris-based group said the risks were “becoming more balanced”, although conflict in the Middle East and continued price rises could still shake the economy from its more stable footings.
The OECD raised its global growth forecast for 2024 to 3.1% from 2.9% in February, following notable improvements in expectations for the United States, China and India. This expansion is expected to continue at 3.2% until 2025.
The bright outlook is that the global economy remains stuck in a stagflation rut (a period of slowing growth mixed with rising unemployment and rising inflation), even if the pace of expansion does not quickly return to the 3.4% average of the pre-pandemic years. It shows that you are trying to avoid falling into. And the energy crisis.
Inflation is expected to be slower than the OECD forecast three months ago, except in the United States, where prices are now expected to rise by 2.5% in 2024 instead of 2.2%. Still, U.S. policymakers said a rate cut should be possible in the second half of 2024.
WASHINGTON, May 1 (Reuters) – Federal Reserve Chair Jerome Powell maintains expectations for rate cuts in 2024, but surging inflation reduces policymakers' confidence that price pressures are easing. admitted that.
The OECD's assessment confirms the slightly more positive views of other international organizations, including the International Monetary Fund, which also raised its forecast in April.
“Despite modest growth and the persistent shadow of geopolitical risks, cautious optimism is beginning to take hold in the global economy,” said Claire Lombardelli, the OECD's chief economist. “Inflation is easing faster than expected, the labor market remains strong, and unemployment is at or near record lows.”
I can see clouds ahead
Regarding the economic recovery, the OECD said the divergence between strong growth in the US and weaker Europe will continue in the short term, creating a “mixed macroeconomic situation”. This will lead to a difference in the pace of rate cuts, with the European Central Bank expected to start easing before the Fed.
Still, the OECD said monetary authorities should be cautious as the conflict could push up energy prices and inflation, and the relief of cost pressures in the services sector could be slower than expected. “Monetary policy needs to remain prudent to permanently contain underlying inflationary pressures.”
For the government, he said, improving economic conditions are an opportunity to address a ballooning debt burden that risks growing further as borrowing costs rise. He also warned that countries face increased spending demands due to aging populations, climate change and the need to strengthen defense.
“There are concerns about the fiscal situation in the medium to long term,” Lombardelli said. “A strong medium-term approach to contain spending, build revenue, and focus policy efforts on structural reforms that boost growth is all needed.” Bloomberg
