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The Organization for Economic Cooperation and Development (“OECD”) expects tighter monetary policy, persistent inflation, and a weaker-than-expected recovery in China to weigh on global growth in 2024.
Global GDP is projected to increase 2.7% in 2024, slowing from 3.0% growth expected in 2023, the organization said. Even with the disappointing growth in China, Asia still accounts for the lion’s share of global growth.
India’s GDP is expected to increase 6.0% in 2024, down from 6.3% projected for 2023, and China’s growth is expected to clock in at 4.6% next year, down from 5.1% this year. Indonesia is expected to see growth accelerate to 5.2% in 2024 from 4.9% in 2023.
Headline inflation has receded in many countries, as food and energy prices declined in the first half of 2023, but core inflation, which excludes volatile energy and food prices, hasn’t slowed as much and remains well above central banks’ targets, the OECD said.
“A key risk is that inflation could continue to prove more persistent than expected, which would mean interest rates need to tighten further or remain higher for longer,” the OECD report said.
The report provides recommendations on what governments should do:
- To address inflation, monetary policy should remain restrictive until there are clear signs that underlying inflationary pressures are “durably abating;”
- Governments should design and implement medium-term fiscal plans that respond to mounting future spending needs related to addressing aging populations, defense, climate transition, and debt burdens;
- Trade integration should continue, as lowering restrictions would boost productivity and growth, it said.
