The Organisation for Economic Development (OECD) has released its updated global economic growth outlook, revealing a complex tapestry of shifting dynamics.
In a surprising turn, the OECD has upwardly revised its 2023 global Gross Domestic Product (GDP) growth forecast to 3.0%, up from the earlier 2.7% estimate provided in June. This unexpected boost is primarily attributed to the remarkable resilience of the United States economy. The OECD now expects the U.S. to grow by 2.2% this year, exceeding the previous forecast of 1.6%, owing to its ability to withstand a series of rate hikes.
However, the outlook for 2024 appears less promising, with global growth projected to dip to 2.7%, down from the June estimate of 2.9%. The U.S. economy, while robust in 2023, is expected to slow to 1.3% in 2024, an improvement from the previously forecasted 1.0%. This indicates potential economic headwinds on the horizon.
A significant factor in these projections is China, where the OECD anticipates a slowdown from 5.1% in 2023 to 4.6% in 2024. This moderation is due to the waning momentum following the relaxation of COVID-19 restrictions and challenges in the property market. These revised figures mark a departure from the more optimistic outlook provided in June, which predicted 5.4% growth for 2023 and 5.1% for 2024.
Conversely, the Eurozone’s growth outlook is a mixed bag. The OECD has slightly reduced its 2023 growth projection for the Eurozone from 0.9% to 0.6%, reflecting ongoing regional challenges. However, a glimmer of hope emerges for 2024, with a projected recovery to 1.1% growth as Germany, the Eurozone’s largest economy, returns to a growth trajectory.
Despite these fluctuations, the OECD advises central banks to maintain higher interest rates until clear signs of easing inflationary pressures emerge. This cautious stance underscores the uncertainties that lie ahead as global economies navigate the post-pandemic landscape.
In summary, the OECD’s latest revisions paint a nuanced picture of the global economic landscape, with the U.S. displaying resilience, China facing a deceleration, and the Eurozone seeking to regain its footing. As businesses and policymakers adapt to these evolving conditions, flexibility and watchfulness will remain crucial in steering the course of the global economy.
Photo Scource: Google
By: Montel Kamau
Serrari Financial Analyst
19th September, 2023
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