On Monday, February 5th local time, the Organization for Economic Co operation and Development (OECD) raised its forecast for global GDP growth, rising from an estimated 2.7% in November last year to 2.9%. The global growth forecast for 2025 remains unchanged at 3%.
In the 2024 forecast, the OECD significantly raised its forecast for US GDP growth from 1.5% to 2.1%. Meanwhile, the Paris based organization has lowered its growth forecast for the eurozone from the previous 0.9% to 0.6%, highlighting the divergence in economic prospects between the US and Europe.
Clare Lombardelli, Chief Economist of the OECD, said that compared to Europe, the US economy has shown "significant strength", while European countries have been struggling in recent years due to the dual impact of tight monetary policies and soaring energy prices.
"The situation we see around the world is mixed: due to tightening monetary conditions, the European economy is slightly weak, and the outlook for the United States is relatively positive." Lombardelli said, "We have seen positive news in the United States that inflation is decreasing and the recovery of real income will support consumption growth."
The OECD believes that the inflation rate in the United States will be 2.2% in 2024 and will further slow down to 2% in 2025, meeting the central bank's inflation target, which is also the lowest level among the Group of Seven (G7) countries; The two numbers for the eurozone are 2.6% and 2.2%, respectively.
The OECD stated that the biggest economic risk currently is "high geopolitical tensions," including the potential danger of the Israeli Palestinian conflict spreading throughout the Middle East and disrupting energy markets. Research has found that doubling transportation costs due to disruptions in the Red Sea could increase global inflation by 0.4 percentage points in one year.
Previously, the Yemeni Houthi armed forces launched attacks on Red Sea cargo ships and clashed head-on with navies from multiple countries such as the United States. This situation has forced shipping companies to detour around the Cape of Good Hope, resulting in a 30% to 50% increase in sailing time and thus occupying the global market's capacity.
Regarding this, Lombardelli said, "This is something we are closely monitoring... We have seen an increase in transportation prices, and if this situation continues for a long time, it will lead to consumer inflation. Currently, we do not expect this to be the case in the long run."
Regarding monetary policy, the OECD stated that the pace of interest rate cuts by central banks around the world must be slower than the rate hike path starting in 2022. "The decline in inflation has given rise to room for rate cuts, but in the coming period, the policy stance of most major economies should still remain restrictive."
The OECD has postponed the expectation of the first US interest rate cut to the second quarter of this year, and the eurozone has postponed it to the third quarter.