A stronger than expected U.S. economy is helping to keep a global slowdown in check this year but a weakening Chinese economy will prove to be a bigger drag next year, the OECD forecast on Tuesday.
After expanding 3.3% last year, global gross domestic product growth is on course to slow to 3.0% this year, the Organisation for Economic Development said in the latest update of its forecasts for major economies.
While that was an upgrade from 2.7% in the OECD’s June outlook, global growth was expected to slow to 2.7% in 2024 – down from its estimate of 2.9% in June.
The Paris-based body said it now expected the U.S. economy to grow 2.2% this year rather than the 1.6% it forecast in June as U.S growth proves more resilient than most economists expected in the face of a series of rate hikes.
Nonetheless, it was likely to slow next year to 1.3%, though that was better than the 1.0% for 2024 expected in June.
The improved U.S. outlook for this year helped offset weakness in China and the euro zone, dragged down by Germany – the only major economy expected to be in recession.
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The OECD forecast that the Chinese economy would slow from 5.1% this year to 4.6% next year as momentum from the end of COVID restrictions fades and the property market struggles. In June, the OECD had forecast 5.4% growth this year and 5.1% next year.
The OECD cut the euro zone’s growth outlook this year to just 0.6% from 0.9% in June, but forecast it would pick up next year to 1.1% – down from 1.5% in June – as Germany returned to growth.
Though the growth outlook for next year would mostly be weak, the OECD said central banks should keep interest rates high until clear signs inflationary pressures have subsided.
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