OECD Lowers 2024 Outlook on Inflation Impact, Weaker-Than-Expected Recovery in China

OECD headquarters

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Despite a stronger-than-expected first half of 2023, persistent inflation and a slowdown in China could weigh on global growth, the Organisation for Economic Co-Operation and Development (OECD) said in its latest Interim Economic Outlook.

Key Takeaways

  • The global economy recorded unexpected growth in the first half of 2023, the OECD’s September 2023 Economic Outlook Interim Report found. 
  • Despite an encouraging start to the year, the OECD reduced its global economic growth outlook for 2024, citing the persistent impact of inflation and a weak recovery in China. 
  • The OECD encouraged governments to keep restrictive monetary policy measures in place while addressing medium-term concerns like spending needs and boosting economies.

Global gross domestic product (GDP) improved at an annualized pace of 3.2% in the first six months of 2023 in comparison with the second half of 2022, and the upturn brought the OECD’s forecast for global GDP growth in 2023 to 3%, up from June’s 2.7% estimation.

However, the higher-than-expected economic gains seen in the first half of 2023 aren't necessarily an indicator that the global economy is in the clear. The OECD reduced its growth projection for 2024 to 2.7%, down from its 2.9% estimate in June. Inflation and a slower-than-anticipated recovery in China contributed to the weakened outlook, the OECD said.

The organization noted that core inflation remains relatively high in many economies, and called for continued restrictive monetary policy until inflation subsides. In the U.S., the Fed began meeting Tuesday, with a decision by the Federal Open Market Committee (FOMC) to keep interest rates steady in its inflation-fighting campaign expected on Wednesday.

While inflation remains high, “governments need to design and implement credible medium-term fiscal plans that recognize and respond to rising future spending needs,” OECD said. Beyond inflation, the OECD urged governments to make structural reforms to boost economic growth, specifically those that target climate and digital transitions.

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  1. Organisation for Economic Co-Operation and Development. “Economic Outlook Interim Report September 2023.”

  2. Organisation for Economic Co-Operation and Development. “Economic Outlook Interim Report June 2023.”

  3. Organisation for Economic Co-Operation and Development. "Positive Growth Continues, Albeit Fragile, and With Persistent Inflation Posing a Key Risk."

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