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The global economy’s growth will remain anaemic as rising interest rates crimp economic activity, while China’s recovery from the pandemic has been slower than predicted, according to the Organisation for Economic Cooperation and Development (OECD) on Tuesday.
The OECD lowered its global economic prediction for 2024 downward in its latest Economic Outlook report, predicting growth to fall to 2.7% next year, down 0.2% from its June estimate, after an already “sub-par” increase of 3% this year.
According to the Paris-based organisation, the global economy will have its poorest yearly growth since the global financial crisis next year, barring 2020, when Covid-19 struck.
“While high inflation continues to unwind, the world economy remains in a difficult place,” said OECD chief economist Clare Lombardelli on Tuesday. “We are facing two challenges: inflation and low growth.”
Interest rate hikes to combat inflation are taking their toll and are anticipated to have a further detrimental impact on economies around the world, according to the OECD. Meanwhile, price inflation shows little signs of slowing, leaving “limited scope for any rate cuts until well into 2024.”
“After a stronger-than-expected start to 2023, helped by lower energy prices and the reopening of China, global growth is expected to moderate,” the OECD said. “The impact of tighter monetary policy is becoming increasingly visible, business and consumer confidence have turned down, and the rebound in China has faded.”
The OECD also lowered its eurozone growth projection for this year and predicted that Germany’s economy will decline by 0.2% in 2023. Except for Argentina, this would make the EU’s largest economy the sole G20 country experiencing a recession.
Oil price increases have also boosted inflation in several countries, particularly those that rely on crude imports, according to Lombardelli.
“Oil prices will remain potentially volatile during this period.” That’s why we listed it as one of the hazards,” she explained. Crude prices have risen by 25% since May and will continue to put pressure on household budgets, according to the analyst.