despite slight progress, economic recovery will remain “weak” in 2024, predicts the OECD

despite slight progress, economic recovery will remain “weak” in 2024, predicts the OECD
despite slight progress, economic recovery will remain “weak” in 2024, predicts the OECD

The outlook for the global economy is beginning to become clearer. The OECD has revised upwards its forecasts for global growth in gross domestic product (GDP) from 2.9% to 3.1% for 2024. And this, while in 2023, economic activity had stalled (3.1%) compared to 2022 (3.4%). Growth is therefore expected to stagnate between 2023 and 2024, instead of slowing down. “In a difficult context, the global economy has demonstrated remarkable resilience”declared Mathias Cormann, Secretary General of the OECD, during a press point in Paris this Thursday.

Several reasons justify “this optimism”. “Inflation has fallen significantly in developed countries. This fall in inflation is the result of restrictive monetary policy, lower energy prices and reduced pressure on supply chains. Real household incomes continue to recover in developed countries. Which means that households benefit better from economic growth”he continued.

However, despite these more optimistic forecasts, the OECD pointed out the risk of a multi-speed recovery between the different regions of the world during its presentation. Above all, growth in 2024 and 2025 should be significantly lower than the average for the period 2013-2019 (3.4%).

“Weak” recovery in the euro zone in 2024

On the Old Continent, the economy is still struggling. The specter of the recession so feared last fall seems to have passed. But uncertainties remain largely in the context of a tightening of budgetary policies throughout the monetary zone. Indeed, the new European Union rules in this area came into force on April 30 after tough negotiations. The OECD therefore forecasts only a slight acceleration in growth in the euro zone between 2023 (0.5%) and 2024 (0.7%). The organization has, however, revised its projection very slightly upwards (+0.1 point) compared to last February.

EU: reconciling budgetary rigor and investments… the reform of the Stability Pact voted by the European Parliament

In addition, weighed down by the spectacular rise in prices and the restrictive monetary policy of the European Central Bank (ECB), the euro zone continues to slow down. And particularly in Germany. After plunging into recession in 2023 (-0.1%), the country should see its growth accelerate slightly in 2024, to 0.2%. More than two years after the outbreak of conflict in Ukraine, its German industry continues to pay a heavy price for its dependence on Russian energy. Thus, the decoupling between the German economy and Russia risks doing serious damage to the economic model defended by the ruling coalition. Added to this is the restrictive budgetary policy which should weigh on investment prospects across the Rhine as well as the Chinese slowdown.

Read alsoGermany: “the sick man of Europe” is counting on an economic turnaround in the spring

Slightly better growth than expected in France

In France, economic growth should do slightly better than expected in 2024 (0.7% compared to 0.6% in February). Activity should nevertheless slow down compared to 2023 (0.9%), before picking up again in 2025 (1.5%). Due to a more accommodating monetary policy expected in June and a decline in inflation, economists expect a rebound in private consumption from the second half of the year. On the other hand, investment (gross fixed capital formation, GFCF) should be down (-0.6%) this year. For its part, the government is now counting on GDP growth of 1% (after 1.4% initially forecast).

With a better than expected growth figure in the first quarter of 2024, the government’s target could be achieved according to several economists. The announced budget cuts of around 20 billion euros in 2024 and 20 billion euros in 2025 could, however, weigh on growth.

Read alsoWhy the 1% growth trajectory promised by the government is possible

As for Italy, activity should stall at 0.7% in 2024 compared to 1% in 2023 with sluggish demand. For Spain, the OECD has not provided figures on growth prospects.

The United States, engine of global growth

The American economy is driving global growth upwards. In its latest forecasts, the OECD expects a very slight increase in GDP from 2.5% to 2.6% between 2023 and 2024, before a possible slowdown in 2025 (1.8%). The slight acceleration expected in 2024 is good news for Democratic President Joe Biden a few months before the presidential election scheduled for next November.

Faced with Donald Trump, the head of state is counting on his economic record to return for a second term in the White House. The Inflation Reduction Act (IRA) and the Chips Act boosted industrial investment in the United States and revived the employment machine after the dark years of the pandemic. But the effects of the head of state’s various recovery plans are fading.

In addition, many uncertainties hover over the FED’s monetary policy. Initially planned for the first half of the year, the scenario of a rate cut in 2024 is increasingly debated given the persistence of inflation. An uncertainty that weighs on the American Democratic camp a few months before the election.

Read alsoDespite the rebound in inflation, the Fed keeps its rates unchanged and rules out an increase

China hits the brakes

Finally, in China, the economic indicators are in the red. After climbing to 5.3% in 2023, GDP growth is expected to slow in 2024 to 4.9% and 4.5% in 2025. Hit hard by strict containment measures after the pandemic, the Chinese economy struggling to get up. The real estate sector is still shaken from all sides by an endless crisis.

On the monetary front, the Chinese Central Bank has eased its policy with a series of rate cuts. This relaxation should allow the private sector to regain some momentum, but the Chinese economy remains weighed down by sluggish demographics and sluggish productivity gains.

Read also“Europe is at an impasse facing China” (Benjamin Bürbaumer, Sciences-Po Bordeaux)

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