The global economy, which has shown remarkable resilience this year and is showing growth, is expected to stagger next year due to the stress of war, inflation aftershocks and high interest rates, the Organization for Economic Cooperation and Development said on the 29th.
The Paris-based Organization of Developed Countries predicted that the global economy would grow from 2.9% this year to 2.7% next year. It is the lowest annual growth rate since the pandemic year of 2020.
The slowdown will be recorded as the world’s strongest economies, the United States and China, slow down next year. The U.S. is expected to grow from 2.4% this year to just 1.5% next year.
The Fed has raised its key interest rate 11 times since March 2022, limiting growth. On the other hand, the Fed’s high-interest rate has increased the cost of loans for consumers and businesses, and based on this, 2022’s highest inflation in 40 years has been put on hold. The OECD saw U.S. inflation fall from 3.9% this year to 2.8% next year and 2.2% in 2025, approaching the Fed’s 2% target.
China’s economy is surrounded by a devastating real estate crisis, rising unemployment and slowing exports, with 5.2% growth this year falling to 4.7% in 2024. China’s “consumption growth rate will remain sluggish due to increased prudent savings, negative prospects for job creation, and increased uncertainty,” he said.
The economies of the 20 Eurozone countries in the European Union are also expected to grow only 0.6% this year due to high interest rates and soaring energy prices after the war in Ukraine, before improving slightly to 0.9% next year.
Looking ahead to the outlook, the global economy has endured a shock since the beginning of 2020. Loan interest has risen painfully as the COVID-19 outbreak, a resurgence in inflation that came as a post-pandemic rebound was stronger than expected, Russia’s war to invade Ukraine, and central banks aggressively raise interest rates to curb consumer prices.
Through all of these, the expansion of the global economy was unexpectedly strong. A year ago, the OECD forecast global growth of 2.2 percent in 2023, but it proved too pessimistic, with 2.9 percent actually expected.
However, the OECD warns that the temporary moratorium ends this year.