OECD Revises upward Global Growth Forecast, Citing the Robust Performance of the US Economy as a Key Factor

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According to the OECD, the US economy is projected to expand by 2.1% in 2024 and 1.7% in 2025. This revision is attributed to lower inflation driving wage growth and prompting interest rate reductions. The OECD has raised its 2024 forecast from 1.5% previously, while maintaining the 2025 projection unchanged, as reported by the sources.

Furthermore, the OECD stated on Monday that the global economy is expected to fare better this year than previously anticipated, with improved prospects in the United States offsetting weaknesses in the euro zone.

Global economic growth is projected to decelerate from 3.1% in 2023 to 2.9% this year, an improvement over the 2.7% forecasted in November in the Organisation for Economic Cooperation and Development’s previous outlook. In an update of its forecasts for major economies, the OECD, headquartered in Paris, maintained its 2025 global estimate at 3.0%. Growth in that year is anticipated to be bolstered by rate cuts from major central banks as inflationary pressures diminish.

OECD maintained that the US economy is projected to grow by 2.1% in 2024 and 1.7% in 2025. This forecast reflects lower inflation, which is expected to boost wage growth and prompt interest rate cuts. The OECD has revised its 2024 forecast from 1.5% previously, while maintaining the 2025 projection unchanged.

Meanwhile, as China grapples with challenges in its real estate market and subdued consumer confidence, its growth is anticipated to slow from 5.2% in 2023 to 4.7% in 2024 and further to 4.2% in 2025. These figures remain unchanged from the November forecasts.

Amidst a slowdown in Germany impacting the wider euro area, the economic outlook for the shared currency bloc has deteriorated since November. The bloc’s economy is now anticipated to improve from 0.5% growth last year to only 0.6% this year, down from the previous projection of 0.9%. Additionally, growth in 2025 is forecasted to be 1.3%, revised down from the earlier estimate of 1.5%.

Although economic prospects varied among major economies, inflation has been cooling more rapidly than expected since November in both the United States and the euro area, while remaining unchanged in China.

This created a path for rate cuts, with the US Federal Reserve anticipated to act in the second quarter, followed by the European Central Bank in the third quarter. However, the OECD cautioned that attacks on Red Sea shipping lanes could contribute to inflationary pressures, albeit to a limited extent. It projected that if a sustained rise in shipping costs persisted, annual OECD import price inflation could rise by nearly 5 percentage points, subsequently adding 0.4 percentage points to consumer price inflation after approximately one year.

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