OECD upgrades global growth outlook as US outperforms
PARIS 鈥 The global economy is growing faster than expected only a few months ago thanks to resilient US activity while inflation is converging more quickly than expected with central banks鈥 targets, the Organization for Economic Cooperation and Development (OECD) said on Thursday, upgrading its outlook.
The global economy would maintain the 3.1% growth rate seen last year and pick up marginally to 3.2% next year, the OECD said, upgrading forecasts dating from February for growth of 2.9% this year and 3% in 2025.
A faster than expected fall in inflation set the stage for major central banks to begin rate cuts in the second half of the year while also fueling gains in consumers鈥 incomes, the OECD said in its latest Economic Outlook.
However, the speed of recoveries diverged widely, the OECD warned, saying lingering sluggishness in Europe and Japan was being offset by the United States, whose growth forecast was hiked to 2.6% this year from a previous estimate of 2.1%.
Next year US growth was expected to cool to a rate of 1.8%, up slightly from 1.7% in February.
Boosted by fiscal stimulus, China鈥檚 economy was also expected to grow faster than expected with its growth now forecast at 4.9% in 2024 and 4.5% in 2025, up from 4.7% and 4.2% respectively in February.
While weakness in Germany would continue to weigh on the broader euro zone, the bloc鈥檚 growth was projected to pick up from 0.7% this year to 1.5% next year as lower inflation boosts households鈥 purchasing power and paves the way for rate cuts. The OECD had previously forecast euro zone growth of 0.6% this year and 1.3% in 2025.
Britain鈥檚 outlook was one of the few to be downgraded with the OECD now forecasting only 0.4% this year compared with 0.7% previously. As interest rates start coming lower from the third quarter of this year, UK growth was seen picking up to 1% in 2025, compared with 1.2% expected in February.
Meanwhile, in Japan, income gains, easy monetary policy and temporary tax cuts would help its growth rate to accelerate from 0.5% in 2024 to 1.1% in 2025, compared with forecasts of 1% for both years previously, the OECD said. 鈥 Reuters
