After a stronger start to 2023, helped by lower energy prices and the lifting of coronavirus restrictions in China, the global economy is expected to slow again this year and in 2024According to OECD interim report (Interim Economic Outlook).

Global GDP is forecast to grow 3% this year and 2.7% in 2024 from 3.3% last year as macroeconomic policy tightens to fight inflation.

For the Eurozone, growth is forecast to slow from 3.4% in 2022 to 0.6% this year and a slightly higher growth rate of 1.1% in 2024. Germany is the only major developed country whose GDP is expected to decline this year (-0.2%).

In the US, growth looks resilient this year as GDP is forecast to grow 2.2% from 2.1% last year, but is expected to slow to 1.3% in 2024 as high interest rates curb demand while excess savings drain of Americans since the pandemic period.

China’s economic growth is expected to hold back – after an impressive restart at the start of the year – due to sluggish domestic demand and structural problems in property markets – with GDP growing 5.1% this year and 4.6% in 2024.

Headline inflation is easing globally, but core inflation – which excludes energy and food prices – remains stubborn in many economies due to cost pressures and high profit margins in some sectors. Headline inflation in G20 economies is forecast to ease to 6% in 2023 and 4.8% in 2024, remaining above the target set by most central banks, while core inflation in advanced G20 economies is forecast to decline from 4, 3% this year to 2.8% in 2024.

The OECD notes, however, that risks to global growth are to the downside, with key concerns being the strength and speed of monetary policy transmission and the persistence of inflation. It also notes the risk of possible new shocks in global energy and food markets. Despite a large decline in energy prices from their 2022 highs following Russia’s invasion of Ukraine, energy markets remain very tight and prospects for oil, gas and coal supply disruptions remain high, he notes.

On interest rates, it says that the scope for rate cuts is likely to be limited in most advanced economies for much of 2024. It adds that “some additional rate hikes could still be necessary, where structural inflation is particularly persistent, but key interest rates appear have reached the highest level or are close to it in most economies’.

The OECD reports that countries face increasing fiscal pressure from rising debt and additional spending on aging populations, climate change and defense. “The short-term strengthening of efforts to reconstitute fiscal space and credible medium-term fiscal programs is necessary,” he notes.