“Overall, underlying inflation in goods has declined steadily, but in services it has been more persistent, remaining significantly above pre-pandemic averages in the majority of countries,” the report said. OECD of May 2024.
There are signs that the global outlook has started to brighten, although growth remains modest. The impact of tighter monetary policy persists, particularly on the housing and credit markets, but global activity appears relatively resilient, inflation is falling faster than expected and, in the private sector, confidence is recovering .”
This is the analysis published in the OECD Economic Outlook report for May 2024. The editors of this report perceive it as “the beginning of a recovery”. Indeed, imbalances between supply and demand in labor markets are “easing,” with unemployment “remaining at or near historic lows.”
According to the same Source, real incomes have started to recover, alongside the moderation of inflation, trade growth has become positive again. This text notes that developments “always differ” from country to country, with strong growth in the United States and many emerging market economies “offsetting weaker performance” in many advanced economies. , especially in Europe.
In 2023, global growth continued at an annual rate above 3%, while global GDP growth is expected to be 3.1% in 2024 and 3.2% in 2025. “This pace is lower than that observed in the decade before the global financial crisis, but close to current estimates of potential growth rates in both advanced and emerging market economies,” the report notes.
Inflation, for its part, is falling towards targeted rates, but tensions persist. It is emphasized that overall inflation fell rapidly in the majority of economies in 2023, under the effect of “tightening monetary policies, the fall in energy prices and the continued easing of tensions at the level of supply chains.
He added that the rise in food prices has also fallen sharply in most countries, “good harvests of essential crops, such as wheat or corn, having resulted in a rapid drop in prices compared to peaks reached” after the start of the war in Ukraine.
“Overall, it was indicated, underlying inflation in goods has declined steadily, but in services it has been more stubborn, remaining significantly above the averages recorded before the pandemic in the majority of countries. »
A slight budgetary tightening expected
The OECD report highlights that artificial intelligence (AI) could boost trend productivity growth and accelerate innovation, although it admits that it is very difficult to estimate the impact on productivity . “The share of companies using AI has grown rapidly, but the majority of them are large,” he said.
The report in question encourages monetary authorities to remain cautious so that they can continue to guide monetary policy in a way that ensures lasting control of underlying inflationary pressures. “If inflation continues to fall, it was explained, a reduction in nominal key rates could be initiated, but the stance of monetary policy should remain restrictive for some time to come.
The pace and extent of policy rate cuts will depend on the data and may vary from one country to another depending on economic conditions.”
Regarding the 2024-2025 budgetary projections, a slight budgetary tightening is expected in many countries, with public authorities starting to restore budgetary room for maneuver.
Fiscal policy must address growing tensions to ensure debt sustainability, according to the same Source. It is also claimed that the public debt/GDP ratio is expected to continue to increase in many countries.
“Public authorities are faced with growing budgetary difficulties, which are due to the increase in the cost of servicing the debt and the additional considerable pressures on expenditure which are expected due to demographic aging, the attenuation of change climate change and adaptation to its consequences, as well as military spending and the need to finance new reforms,” it was indicated.
