Global GDP growth will slow to 2.9% in 2024

Global GDP growth in 2024 will slow to 2.9% from 3.1% recorded at the end of 2023, the OECD predicts. Leading indicators point to moderate expansion in the size of most of the world’s major economies. The United States stands out somewhat from the general background – the OECD believes that the country’s GDP will increase faster than previously expected. The organization’s experts note that despite a noticeable decline in global inflation, it still exceeds the target level. An additional impetus for price growth is now being given by the situation in the Red Sea, due to which the cost and time of transporting goods continues to increase.

The global economy will grow by 2.9% this year and by 3% in 2025, according to a new forecast from the Organization for Economic Co-operation and Development (OECD). Compared to the organization’s November report, the forecasts have been slightly improved. As previously at the IMF (see Kommersant on January 31), the OECD emphasizes that the revision is largely due to higher-than-expected final indicators for 2023.

In particular, estimates for the United States have been significantly improved: it is assumed that in 2024, the country’s GDP will grow by 2.1%, rather than by 1.5% as previously predicted. The American economy will be supported by a strong labor market and growing domestic demand. In 2023, US GDP grew by 2.5%, in 2025 it is expected to grow by 1.7%.

For the euro area economy, on the contrary, forecasts have been reduced: it is expected that it will grow by 0.6% in 2024 and by 1.3% in 2025 (in November, growth was expected by 0.9% and 1.5%, respectively) . The deterioration in expectations can be explained by the dynamics of leading indicators, indicating that high interest rates are still significantly constraining business activity in most European countries (see Kommersant on January 9). In 2023, euro area GDP increased by 0.5%, according to OECD estimates.

Due to weak domestic demand and problems in the real estate market, the growth rate of the Chinese economy will slow down in the next two years: from 5.2% in 2023 to 4.7% in 2024 and 4.2% in 2025, it follows from OECD report. Let us note that the new economic goals of the PRC will be clear after the March session of the National People’s Congress. Apparently, China’s GDP growth target will not differ significantly from the OECD and IMF forecasts (4.6%). In conditions of weak demand – both external and internal – achieving more ambitious goals looks less and less likely.

Despite the slowdown in inflation recorded in the report in 2023, there is no talk of defeating it yet. The OECD forecasts that most G20 countries will not reach target levels until the end of 2025. In 2024, inflation in the G20, according to new forecasts, may even accelerate slightly: to 6.6% from last year’s 6.3% (in November it was expected to slow down to 5.8%).

A higher price increase is expected due to growing geopolitical risks. As the OECD reminds, the situation in the Red Sea has already led to a significant increase in price pressure: transportation of goods has become more expensive, delivery times have increased. The organization does not predict how long what is happening in the region will affect global trade, noting that the increasing complexity of logistics due to the fragmentation of the global economy is already noticeably delaying the achievement of inflation goals. Core inflation (excluding food and energy) in the G20 countries will continue to slow down and will amount to 2.5% in 2024 after 4.2% in 2023, the OECD predicts.

Kristina Borovikova