Stronger-than-expected GDP growth in 2023 is about to slow down as tighter financial conditions, weak trade growth and lower business and consumer confidence continues to take its toll on global economies, the Organisation for Economic Co-operation and Development's (OECD) has said, Report informs via Euronews.
In its latest economic outlook report, the OECD projects in its twice-yearly analysis of the major global trends and prospects for the next two years, a soft landing for advanced economies.
Globally, it predicts growth will to ease to 2.7% in 2024, from 2.9% this year, before picking up to 3% in 2025, due to real income growth recovery and lower interest rates.
Before, however, the OECD had forecast a slowdown of growth due to weak PMI readings (survey showing business sentiment) in many major economies, slowing credit growth and persistently low levels of consumer confidence.
Advanced economies face generally slower growth than emerging markets, and Europe’s performance is lagging behind North America and major Asian economies.
Europe, where the economy is closely affected by high-interest rates and where higher energy costs drag on incomes, faces a particularly difficult path to fully recover.
By contrast, GDP growth has held up better in the United States and many other commodity-producing economies. The emerging market and developing economies have collectively maintained growth rates close to those seen prior to the pandemic.
According to the OECD, the eurozone can look forward to 0.5% annual GDP growth for the last three months of 2023. The bloc's GDP is expected to swell by 0.6% this year, followed by 0.9% in 2024 and 1.5% in 2025 respectively.
Growth is dragged down in Europe, where the importance of bank finance is relatively high and the pressure on incomes from higher energy costs has been particularly strong. Looking ahead, however, consumption is expected to be strong due to tight labour markets and increasing real incomes as inflation is slowing. On the other hand, the forecast also estimates that the full impact of tighter monetary policy in the bloc is still to appear and activity may be hit more strongly than expected.