OECD Projects Global Growth Stabilization at 3.2% This Year, According to Reuters

Global Economic Growth Stabilizing: OECD Outlook

PARIS – The Organisation for Economic Cooperation and Development (OECD) reported on Wednesday that global growth is stabilizing as the effects of central bank rate hikes diminish and decreasing inflation increases household incomes. The organization slightly raised its economic outlook for this year.

The OECD forecasts the world economy will grow by 3.2% in both the current and the following year, adjusting its 2024 projection up from 3.1% while keeping the 2025 estimate unchanged.

With the waning impact of central bank tightening, anticipated interest rate reductions are expected to stimulate spending. Lower inflation is also expected to benefit consumer expenditure, according to the OECD’s latest economic outlook update.

If the recent drop in oil prices continues, global headline inflation could be approximately 0.5 percentage points lower than previously expected over the next year, the Paris-based organization noted.

As inflation trends toward central bank targets, the OECD projected that the U.S. Federal Reserve’s primary interest rate could decrease to 3.5% by the end of 2025, down from the current 4.75%-5%. Similarly, the European Central Bank is expected to lower its rate to 2.25% from 3.5%.

In terms of growth, the U.S. is anticipated to experience a slowdown from 2.6% this year to 1.6% in 2025. However, the projected interest rate cuts are expected to help cushion this decline, leading the OECD to adjust its 2025 estimate down from 1.8% forecasted in May.

The Chinese economy, the second largest in the world, is expected to decelerate from 4.9% growth in 2024 to 4.5% in 2025, as government stimulus spending is countered by lagging consumer demand and ongoing issues in the real estate sector.

In contrast, the eurozone is set to counterbalance the slower growth in the two largest economies, with the 20-nation bloc’s growth forecast nearly doubling from 0.7% this year to 1.3% next year, driven by increases in income outpacing inflation.

The OECD has also raised its projections for the UK economy, forecasting an expansion of 1.1% in 2024 and 1.2% in 2025, a significant increase from previous estimates of 0.4% this year and 1% for next year.