Michelle ThompsonThe world economy was expected to perform somewhat better in 2023 at the same time. But it’s anticipated that the effects of tight monetary policy won’t be felt for some time.
According to the Organization for Economic Cooperation and Development (OECD), which reduced its projection for 2024 from 2.9% to 2.7% on Tuesday, growth in the global economy is anticipated to remain “sub-par” in 2019.
It also forecast that inflation will continue to exceed the targets established by central banks throughout the world, which have been raising interest rates in an effort to contain increasing prices.
The OECD also increased its prediction for global growth in 2023 from 2.7% to 3.0% at the same time.
What was said by the OECD?
Global GDP is anticipated to decline after a stronger-than-expected start to 2023, aided by reduced energy prices and China’s reopening, according to the OECD.
The effects of tighter monetary policy are becoming more apparent, consumer and corporate confidence are declining, and China’s recovery is losing steam.
Last week, the European Central Bank increased interest rates to a record high in an effort to reduce inflation to its 2% target. The European Commission reports that in August, the inflation rate in the Eurozone was 5.3%.
“Inflation is projected to moderate gradually over 2023 and 2024 but to remain above central bank objectives in most economies,” the OECD continued.
“The effects of past increases will continue to work their way through economies for some time, even if policy rates are not raised further.”
Not all nations are doing equally well
A “sharper-than-expected slowdown in China” was one of the factors contributing to the OECD’s increasing pessimism about the world economy. China’s growth was forecasted to decline from 5.1% this year to 4.6% the next year.
The greatest economy in the world, the US, was also predicted to develop less slowly, from 2.2% in 2023 to 1.3% in 2024.
The largest economy in the EU, Germany, was expected to struggle, which would have resulted in an increase in growth for the Eurozone from 0.6% to 1.1%, but both percentages would have been lower than early projections.
Even though all wealthy nations have been battling with inflation, the UK is anticipated to have the highest overall rate for 2023: 7.2% as opposed to the 6.9% that the OECD had first predicted.
Inflation rates in Germany and France were predicted to be 6.1% and 5.8%, respectively, for 2023, both numbers decreasing from the prior prediction.
