The global economy appears poised for steady growth through 2024 and 2025, with inflation showing signs of gradual decline, according to the OECD’s latest Interim Economic Outlook released on September 25, 2024. Despite these optimistic projections, persistent risks such as geopolitical tensions and uncertainties in monetary policies could still influence the global economic landscape.
Economic Growth Projections
The OECD forecasts a global economic growth rate of 3.2% for both 2024 and 2025, a slight uptick from 3.1% in 2023. However, growth rates will vary significantly across different regions:
- United States: Expected to grow by 2.6% in 2024, slowing to 1.6% in 2025.
- Euro Area: Anticipated modest growth of 0.7% in 2024, increasing to 1.3% in 2025.
- China: Growth projected to decelerate to 4.9% in 2024 and 4.5% in 2025.
- India: Remains the fastest-growing major economy with expected growth of 6.7% in 2024 and 6.8% in 2025.
Inflation Outlook
Headline inflation continues to decline in most G20 countries. As of August 2024, approximately 80% of OECD countries have inflation rates at or near their target (<+1pp). In the G20, inflation is projected to decrease from 5.4% in 2024 to 3.3% in 2025. Key projections include:
- United States: Inflation is expected to drop to 1.8% in 2025, down from 2.4% in 2024.
- Euro Area: Inflation is projected to decline from 2.4% in 2024 to 2.1% in 2025.
- Emerging Markets: While inflation remains higher than in advanced economies, it is anticipated to gradually ease over the next two years.
Risks to watch
While the outlook remains positive, the OECD highlights several risks that could impact global growth. Strict monetary policies might reduce consumer and business spending more than expected, and unexpected changes in inflation could cause financial market instability. Ongoing geopolitical tensions, including from Russia’s war of aggression against Ukraine and evolving conflicts in the Middle East, could drive inflation higher and slow economic activity. On the positive side, rising real wages can boost consumer confidence and spending, while lower global oil prices would help further reduce inflation.