World economy likely to slow next year: OECD

The global economy, which has proved surprisingly resilient this year, is expected to falter next year under the strain of wars, still-elevated inflation and continued high interest rates.

The Paris-based Organization for Economic Cooperation and Development estimated Wednesday that international growth would slow to 2.7 percent in 2024 from an expected 2.9 percent pace this year. That would amount to the slowest calendar-year growth since the pandemic year of 2020.

A key factor is that the OECD expects the world's two biggest economies, the United States and China, to decelerate next year. The US economy is forecast to expand just 1.5 percent in 2024, from 2.4 percent in 2023, as the Federal Reserve's interest rate increases — 11 of them since March 2022 — continue to restrain growth.

The Chinese economy, beset by a destructive real estate crisis, rising unemployment and slowing exports, is expected to expand 4.7 percent in 2024, down from 5.2 percent this year. China's "consumption growth will likely remain subdued due to increased precautionary savings, gloomier prospects for employment creation and heightened uncertainty," the OECD said.

Also likely to contribute to a global slowdown are the 20 countries that share the euro currency. They have been hurt by heightened interest rates and by the jump in energy prices that followed Russia's military action against Ukraine. The OECD expects the collective growth of the eurozone to amount to 0.9 percent next year — weak but still an improvement over a predicted 0.6 percent growth in 2023.

Challenges amid global uncertainty

The world economy has endured one shock after another since early 2020 — the eruption of Covid-19, a resurgence of inflation as the rebound from the pandemic showed unexpected strength, Moscow's war against Ukraine and painfully high borrowing rates as central banks acted aggressively to combat the acceleration of consumer prices.

Yet through it all, economic expansion has proved unexpectedly sturdy. A year ago, the OECD had predicted global growth of 2.2 percent for 2023. That forecast proved too pessimistic. Now, the organisation warns, the respite may be over.

"Growth has been stronger than expected so far in 2023," the OECD said in its 221-page report, "but is now moderating as the impact of tighter financial conditions, weak trade growth and lower business and consumer confidence is increasingly felt."

Moreover, the OECD warned, the world economy is confronting new risks resulting from heightened geopolitical tensions amid Israel's war on Gaza— "particularly if the conflict were to broaden."

"This could result in significant disruptions to energy markets and major trade routes," it said.