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The Organization for Economic Cooperation and Development (OECD) announced on Wednesday that global economic growth is anticipated to slow down slightly next year. However, the risk of a hard landing has diminished, despite lingering concerns over high levels of debt and uncertainty surrounding interest rates.
According to the OECD’s latest Economic Outlook, global growth is expected to moderate from 2.9% this year to 2.7% in 2024. Subsequently, a rebound is forecasted for 2025, with global growth reaching 3.0%.
In the realm of advanced economies, comprising the OECD’s 38 members, a soft landing is on the horizon. Notably, the United States is performing better than initially anticipated. The OECD revised its forecast for U.S. growth, expecting a slowdown from 2.4% this year to 1.5% next year. This marks an upward adjustment from their September predictions of 2.2% growth in 2023 and 1.3% in 2024.
Despite the alleviation of the risk of a hard landing in the United States and other regions, the OECD cautioned that the threat of recession still looms. Factors such as weak housing markets, high oil prices, and sluggish lending continue to pose challenges.
China’s economic growth is also anticipated to decelerate due to challenges such as a deflating real estate bubble and increased consumer savings amid heightened uncertainty. The OECD forecasts China’s growth to ease from 5.2% this year to 4.7% in 2024, with a further slowdown to 4.2% in 2025.
In the euro area, growth is expected to pick up from 0.6% this year to 0.9% in 2024 and 1.1% in 2025, particularly as Germany, the region’s largest economy, emerges from a recession this year. However, the OECD sounded a note of caution, highlighting the uncertainty surrounding the impact of interest rate hikes in the euro zone, given the high level of bank financing.
Japan, the only major advanced economy yet to raise interest rates in the current cycle, is projected to experience a slowdown from 1.7% growth this year to 1.0% in 2024, followed by a modest pickup to 1.2% in 2025.
Despite varying growth outlooks among countries, the OECD warned of shared fiscal pressures. Debt burdens are expected to persistently rise for years to come in G7 countries, posing ongoing challenges to economic stability.
