Global Economic Outlook by OECD

PARIS (Reuters) – Global growth is stabilising as central bank rate hikes diminish and falling inflation boosts household incomes, according to the OECD’s update.

The world economy is projected to grow 3.2% in both 2024 and 2025, with a slight increase for 2024 from 3.1% previously while keeping 2025’s forecast unchanged.

As the lagged effect of central bank tightening fades, expected interest rate cuts are projected to boost spending. Consumer spending is anticipated to benefit from lower inflation.

If the recent decline in oil prices continues, global headline inflation could be 0.5 percentage points lower than expected over the next year, stated the Paris-based OECD.

With inflation approaching central bank targets, the OECD forecasts the U.S. Federal Reserve’s main interest rate will ease to 3.5% by end of 2025, down from 4.75%-5% currently. The European Central Bank is projected to cut its rate to 2.25% from 3.5%.

U.S. growth is expected to decelerate from 2.6% this year to 1.6% in 2025, although interest rate cuts could cushion this slowdown, leading the OECD to adjust its 2025 estimate down from 1.8%.

The Chinese economy is projected to slow from 4.9% in 2024 to 4.5% in 2025, as government stimulus is countered by declining consumer demand and challenges in real estate.

The eurozone is expected to compensate for slower growth in major economies, with the bloc’s growth forecast nearly doubling from 0.7% this year to 1.3% next year, as incomes outpace inflation.

The OECD also raised its outlook for the UK economy, projecting a growth of 1.1% in 2024 and 1.2% in 2025, an upgrade from previous forecasts of 0.4% this year and 1% next year.