NEW YORK: The global economy is growing faster than expected only a few months ago thanks to resilient US activity while inflation is converging more quickly than expected with central banks’ targets, the OECD said on Thursday, upgrading its outlook.
The global economy would maintain the 3.1% growth rate seen last year and pick up marginally to 3.2% next year, the Organisation for Economic Cooperation and Development said, upgrading forecasts dating from February for growth of 2.9% this year and 3% in 2025.
A faster than expected fall in inflation set the stage for major central banks to begin rate cuts in the second half of the year while also fuelling gains in consumers’ incomes, the OECD said in its latest Economic Outlook.
However, the speed of recoveries diverged widely, the OECD warned, saying lingering sluggishness in Europe and Japan was being offset by the United States, whose growth forecast was hiked to 2.6% this year from a previous estimate of 2.1%.
Next year US growth was expected to cool to a rate of 1.8%, up slightly from 1.7% in February.
Boosted by fiscal stimulus, China’s economy was also expected to grow faster than expected with its growth now forecast at 4.9% in 2024 and 4.5% in 2025, up from 4.7% and 4.2% respectively in February.
While weakness in Germany would continue to weigh on the broader euro zone, the bloc’s growth was projected to pick up from 0.7% this year to 1.5% next year as lower inflation boosts households’ purchasing power and paves the way for rate cuts. The OECD had previously forecast euro zone growth of 0.6% this year and 1.3% in 2025.
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