The global economy might be set for a slowdown in 2024, according to the OECD ( Organization for Economic Co-operation and Development), an international organization comprising 38 nations who work together to find solutions to common challenges.
Even though worldwide growth has been more resilient in the first half of 2023 than initially expected, the outlook remains bleak.
The reasoning is two-fold: high inflation and low growth. Interest rate hikes aiming to curb inflation have slowed economic activity around the globe. Since March 2022, the Federal Reserve has raised rates 11 consecutive times. Similarly, the European Central Bank just announced its 10th consecutive hike last week. Additionally, China, the world’s second-largest economy, is rebounding from the pandemic at a slower rate than expected.
The OECD’s latest forecast projects global economic growth to ease to 2.7% next year, a reduction from this year’s expected 3% growth rate. Notably, only two economies are expected to see their economies shrink: Germany and Argentina. Germany’s sluggish economy could have broader repercussions for the European Unions.
But the OECD warned governments to resist the urge to jump ahead to stimulate their economies. While stimulus measures can lend a temporary boost to consumer spending and help to mitigate recessionary risks, they can also stoke inflation, a problem nations the world over are already struggling with.
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