Positive outlook for the world economy in 2024? This is the OECD’s prediction.

Positive outlook for the world economy in 2024? This is the OECD’s prediction.

In its most recent review of the main worldwide trends and forecasts for the next two years, the OECD projects several interesting things, which Euronews Business looks at.

more robust than anticipated As the Organization for Economic Co-operation and Development (OECD) has noted, GDP growth in 2023 is expected to slow down due to tighter financial conditions, sluggish trade growth, and decreased business and consumer confidence.

The OECD predicts a soft landing for advanced economies in its most recent report on economic outlook, which is a twice-yearly examination of the key global trends and prospects for the ensuing two years.Global growth is expected to slow down to 2.7% in 2024 from 2.9% this year before accelerating to 3% in 2025 as a result of reduced interest rates and a rebound in real income growth.

However, the OECD had already predicted a slowdown in growth as a result of chronically low levels of consumer confidence, decreasing loan growth, and negative PMI readings (a measure of business sentiment) in several major economies.

The growth rate is not uniform.

Compared to emerging markets, advanced economies often have slower growth, and Europe is now performing worse than major Asian and North American economies.

Europe, whose economy is heavily impacted by high interest rates and where salaries are being negatively impacted by rising energy costs, may find it especially challenging to recover fully.In contrast, many other economies that produce commodities, like the United States, have seen better GDP growth. All together, emerging markets and developing countries have kept growth rates near to what they were before the pandemic.

The last quarter of 2023 should see 0.5% annual GDP growth in the eurozone, according to the OECD. The GDP of the bloc is predicted to increase by 0.6% this year, 0.9% in 2024, and 1.5% in 2025.In Europe, growth is hindered by the relative importance of bank financing and the pressure that rising energy prices have been placing on incomes. But going forward, robust spending is anticipated because of tight labor markets, rising real incomes, and a falling rate of inflation.

However, the prediction also indicates that the full effects of the bloc’s tighter monetary policy are still to be felt, and that activity may be hurt harder than anticipated.

Though its decreasing, inflation is still a worry.

The last year has seen a decline in headline inflation nearly everywhere, primarily as a result of lower energy costs in the first half of 2023.

But since June, oil prices have increased due to supply interruptions in the oil market and cuts by major OPEC+ economies. Prospects for inflation are currently clouded by this as well as the uncertainty brought on by escalating global tensions.Core inflation in the G7 economies as a whole is predicted to have decreased from around 4.25% in the first half of the year to below 3% in the third quarter of 2023, relative to the previous quarter.

The OECD predicts that inflation in the Eurozone will drop to 2.9% in 2025 from 5.5% this year and 2.9% the next year.

The prognosis indicates 2.1% only for the final three months of 2025, which is the end of the investigated period, meaning that the ECB’s aim of 2% will not be achievable for another two years.

The unemployment rate is quite low.

The unemployment rate in all OECD nations is predicted to be 5.1% in 2024 and 2025.Australia, Canada, the United States, and the United Kingdom are expected to see an increase in the rate. On the other hand, it is anticipated that unemployment in Japan and the eurozone will stay low, perhaps 6.5% as it currently stands.

Global labor force growth has continued to be robust, although yearly employment growth has slowed, there are fewer job openings, and in many places, unemployment rates have slightly increased.Tight labor markets continue to encourage private consumption at the moment. Parallel to this, meanwhile, is the prediction that rising interest rates will weigh down private investment.

Economic fallout from the Israel-Hamas conflict

Expanding hostilities in the Middle East have the potential to completely destroy present expectations for the world economy, especially for the economies of Europe, where shocks are becoming more palpable due to rising energy and food costs.

A broader conflict in the Middle East might overshadow prospects for the global economy by seriously disrupting important trade routes and the energy markets. If the financial markets factor in this additional risk, this would further slowdown growth and eventually drive up inflation.

Global trade needs to be revived

“International trade is weak,” declared Clare Lombardelli, head economist at the OECD. According to OECD projections, in the first half of 2023, there was a mere 0.1% annual growth in global commerce in goods and services.Growing trade barriers, protectionist measures, and the reorganization of global value chains have all had an impact on the industry. Considering the significance of international trade for development and productivity, its uncertain future is a major cause for concern.Moreover, the OECD called for multilateral collaboration to boost international commerce.

What steps may be taken to ensure sustained growth?

The world economy is headed toward better-than-expected growth in 2024 as inflation returns to goal without a significant halt in growth or a big increase in unemployment.

The OECD advises sticking with the current tight monetary policy until there are definite indications that inflation is kept under control in order to preserve this possibility, with leeway for further rate increases if necessary.The need to maintain downward pressure on inflation will limit scope for policy rate reductions until well into 2024,” said the report.

The OECD is also recommending cautious fiscal policy, pointing out that governments must balance increased expenditure on aging populations, the environment, and other priorities with growing expenses to refinance their enormous debts the defense and shift to a more climate-friendly environment.M-J Global is the best visa agent in Dubai,Oman and Qatar and best immigration consultant in Oman,Dubai and Qatar.It is the most trusted immigration agency in middle east and the business migration agent in Oman,Dubai and Qatar.M-J Global is the best registered Immigration Agent in Dubai,Oman and Qater.