The OECD said there are signs that the global outlook has started to brighten, though growth remains modest.
"The impact of tighter monetary conditions continues, especially in housing and credit markets, but global activity is proving relatively resilient, inflation is falling faster than initially projected and private sector confidence is improving, the report said.
The OECD also highlighted that supply and demand imbalances in labour markets are easing, with unemployment remaining at or close to record lows.
"Real incomes have begun to improve as inflation moderates and trade growth has turned positive. Developments continue to diverge across countries, with softer outcomes in many advanced economies, especially in Europe, offset by strong growth in the United States and many emerging market economies."
Headline inflation in the OECD countries is expected to fall to 5% in 2024, from 6.9% in 2023, and decline further to 3.4% in 2025. By the end of 2025, inflation in the OECD is projected to be close to most central bank targets of 2%. This is likely to be due to dropping energy and goods prices, as well as more rigid monetary policies.
Growth in the UK and other major European economies estimated to be modest
The G20 and other developed nations’ growth are likely to lag significantly behind developing nations, with the United Kingdom estimated to see a growth of only 0.4% in 2024, rising to 1% in 2025.
The Euro area is estimated to see a growth of 0.7% in 2024 and 1.5% in 2025, whereas France is also likely to see a 0.7% this year, but could possibly lag the Euro area with a 1.3% growth in 2025.
Similarly, Italy is also expected to grow 0.7% this year, jumping to 1.2% in 2025.
Germany, long considered the “sick man” of Europe, is expected to perform disappointingly this year as well, with a very modest 0.2% growth. However, things could be looking significantly more positive for the country next year, with the OECD expecting a 1.1% surge.
On the other hand, India is expected to grow at a steady rate of 6.6% for both 2024 and 2025, while Indonesia could see a 5.1% rise in 2024, moving to 5.2% in 2025.
However, China, which is still struggling with the lingering effects of an uncertain economy, high cost of living and waning post-pandemic demand, is expected to increase 4.9% this year, but only 4.5% next year.
In February 2024, the OECD unemployment rate came in at 4.9%, hovering near its lowest level since 2001.
OECD Secretary-General Mathias Cormann said, in a statement,”The global economy has proved resilient, inflation has declined within sight of the central bank targets and risks to the outlook are becoming more balanced. We expect steady global growth for 2024 and 2025, though growth is projected to remain below its longer-run average.
“Policy action needs to ensure macroeconomic stability and improve medium-term growth prospects. Monetary policy should remain prudent, with scope to lower policy interest rates as inflation declines, fiscal policy needs to address rising pressures to debt sustainability, and policy reforms should boost innovation, investment and opportunities in the labour market, particularly for women, young people and older workers.”
