According to the OECD, the global economy will continue to weaken next year and inflation will remain high. Global economic output is expected to increase by three percent this year, but only by 2.7 percent in 2024, the industrialized nations organization announced on Tuesday. In 2022 it was still 3.3 percent. The forecast for 2023 was increased by 0.3 percentage points and that for 2024 was reduced by 0.2 points.
An important reason for the poor outlook is the interest rate increases by central banks in order to get inflation under control. High interest rates usually lead to fewer investments because financing becomes more difficult. In Germany, this can currently be clearly observed in the construction industry. Apart from Germany, only Argentina, which is chronically debt-plagued and dependent on international financial aid, is likely to shrink this year.
Russia’s economy is also growing surprisingly
In contrast, all other large industrialized countries are growing, including Russia, which is subject to extensive sanctions. The OECD experts estimate that the German economy will decline by 0.2 percent this year. In June, stagnation was still considered possible. In 2024 there should be enough growth of 0.9 percent, less than previously expected. For a long time, Germany was particularly dependent on cheap energy supplies from Russia, which have largely disappeared since the war in Ukraine.
According to the OECD, central banks should stay the course until there are clear signs that price pressure has been permanently eased. But that can’t be said yet. The experts are expecting inflation of 5.5 percent in the euro area and 6.1 percent in Germany this year. In 2024 it will probably be three percent. However, the European Central Bank is aiming for two percent as the optimal rate for the economy. For the USA, which started raising interest rates earlier, values of 3.8 and 2.6 percent are expected. Inflation continues to be strongly influenced by energy prices, so the situation has eased somewhat in recent months, according to the OECD. However, there are huge regional differences – values close to zero percent in China, over 50 percent in Turkey and even over 100 percent in Argentina. In addition, core inflation declines more slowly without energy and food.
The biggest risk is the economy in China
China still has significantly above-average growth rates – at 5.1 percent in 2023 and 4.6 percent in 2024. However, the estimates have been significantly reduced. A possibly even greater slowdown in China is a key risk for the global economy, as the OECD emphasized. “High debt and the weak real estate sector are significant challenges.” In addition, consumption there is only gradually recovering despite the reopening of the economy following the strict Corona policy.
The USA, on the other hand, is an important pillar of the global economy. Here the OECD forecasts have been raised significantly. The world’s largest economy is expected to grow by 2.2 percent in 2023 and by 1.3 percent in 2024. There have been surprisingly good developments recently in Brazil, India and South Africa. According to the OECD, the euro area will grow by 0.6 percent this year, driven by Spain and France. In 2024 there should be an increase of 1.1 percent in the euro zone. Growth rates of 0.8 and 0.9 percent are forecast for Russia – instead of the current shrinking economy.