OECD forecasts fragile global growth in 2024, amid inflation

Inflation is slowing and, with it, growth. In its latest forecasts, published Wednesday November 29, the Organization for Economic Coordination and Development (OECD) expects global gross domestic product (GDP) to increase by 2.7% in 2024, compared to 2.9% in 2023. However, there are significant differences between regions. The United States is in excellent health (+2.4% in 2023), as are emerging countries, particularly in Asia – growth remains high in China, even if it decelerates, going from 5.2% in 2023 to 4.7% in 2024 – while Europe stagnates. Growth in the euro zone should not exceed 0.6% in 2023 (0.9% in France and −0.1% in Germany).

It is above all the tightening of monetary policies which is weighing on activity. The sectors most sensitive to rate variations, such as real estate, are the hardest hit, as are the regions most dependent on bank financing, like Europe. Household consumption, better than expected thanks to a job market that is doing well, allowed activity to resist.

The slowdown in inflation is slower than expected, which the OECD says « limits the possibilities for reducing key rates until 2024 ». Consumer price inflation in G20 countries is expected to increase from 6.2% in 2023 to 5.8% in 2024.

Threats vary depending on the country

“The impact of rising interest rates and tightening credit standards might prove stronger than expected, leading to a sharper slowdown in spending, higher unemployment and an increase in bankruptcies,” warns the OECD.

Threats to growth vary by country. In the USA, “there is a risk that inflation proves to be persistent”, underlines the institution, while in the euro zone “it is possible that activity will be hit harder than expected” and, finally, in emerging countries, “countries with vulnerabilities linked to their structural debt are now closely monitored by the markets”.

Clare Lombardelli, the OECD’s chief economist and former chief economic adviser to the UK Treasury, also draws attention to widening long-term deficits, due to the high cost of debt, rising spending military, investments to decarbonize economies as well as the aging of the population, which weighs on public finances.