OECD Lowers Eurozone Growth Forecast for 2024

The global economy is expected to grow this year at nearly the same pace as in 2023, with improved prospects for the U.S. and weaker growth in the eurozone than previously anticipated due to Germany’s slowdown, estimates the Organisation for Economic Co-operation and Development.

The global economy is projected to grow by 2.9 percent this year, according to the OECD, raising its forecast from last autumn by 0.2 percentage points. This would mean that the growth rate should only slightly slow compared to 2023, when activity increased by 3.1 percent. The forecast for 2025 also indicates nearly the same growth, with an estimated growth rate of three percent, in line with the OECD’s calculations from November.

The expected reduction in interest rates in major economies, alongside a parallel easing of inflation, will drive growth, the OECD explains in its interim forecasts for leading global economies.

The U.S. economy is expected to grow by 2.1 percent in 2024 and slow to 1.7 percent in 2025, they estimate. Price growth is expected to slow, prompting the central bank to lower interest rates, while real incomes will rise.

Activity in the eurozone, on the other hand, is projected to grow by only 0.6 percent this year, according to the OECD, which has lowered its estimate by 0.3 percentage points due to the anticipated slowdown in Germany. They have slightly reduced the estimate for next year from 1.5 to 1.3 percent.

The German economy is expected to nearly stagnate this year, with a projected growth rate of 0.3 percent. In 2025, growth is expected to accelerate to 1.1 percent according to their calculations. France is expected to follow the eurozone average.

China is facing issues with a real estate market crisis and ‘unhappy’ consumers, so economic growth this year is expected to slow to 4.7 percent, down from last year’s 5.2 percent. In 2025, activity is expected to further slow to 4.2 percent, the OECD forecasts.

The Indian economy is expected to grow the strongest among the major economies this year, by 6.2 percent. Indonesia follows with a projected growth rate of 5.1 percent.

Inflation has weakened faster than expected in the U.S. and the eurozone since November, while it has remained stable in China, they found, warning that price growth could accelerate.

– A high level of geopolitical tension poses a significant short-term risk to activity and inflation, especially if conflict in the Middle East causes disruptions in energy markets – they explain.

Consumer price growth could unexpectedly accelerate due to persistent price pressures in the services sector, while economic activity could grow more weakly if the impact of tighter financing conditions exceeds expectations, they add.