The stability of the global economy has been closely monitored, especially in light of the inflationary chaos experienced in recent years. According to the Organization for Economic Cooperation and Development (OECD), a report released on Wednesday, titled “Turning the Corner,” foresees a 3.2% growth rate over the next two years. This refreshing development highlights several positive signs, such as declining inflation in major economies, increased trade activity, and a gradual reduction in interest rates by central banks.
While there’s optimism in the air, the OECD report does urge vigilance. Governments are called upon to remain alert to potential risks and to continue implementing reforms to bolster growth. Alvaro Santos Pereira, the OECD’s chief economist, emphasized the importance of structural changes. According to Pereira, the pace of regulatory reform has slowed, noting that essential sectors are stagnating and that productivity growth remains concerning. Therefore, he urged policymakers to prioritize product-market reforms to stimulate competition and foster growth.
In a post-pandemic world, inflation surged globally, with essential goods and services’ prices climbing over 10% annually in some regions. However, the report suggests a return to stability. By the end of August, inflation in four out of five OECD countries was within one percentage point of their central bank targets. For example, the Federal Reserve in the United States has aimed for a 2% inflation rate.
The OECD’s forecast extends more hope towards the future. For instance, headline inflation for G20 nations is expected to hit roughly 3.3% by 2025. Also, economic growth appears positive for 2024, save for Argentina and Japan. India’s robust growth rate of 6.7% looks set to lead the G20 pack, closely followed by Indonesia and China. Interestingly, even Russia, despite international sanctions related to its conflict in Ukraine, is forecasted to achieve 3.7% growth.
Moving on, labor shortages that plagued many developed nations after the pandemic are also beginning to relent. Despite rising wages contributing to inflation, job vacancies in many G20 countries have been steadily decreasing since late 2022 and early 2023. Notably, the UK and the US saw over 30% reductions in unfilled job positions. While this trend has led to slightly higher unemployment rates, it has also alleviated some inflationary pressures.
Crucially, the OECD has outlined recommendations for governments worldwide. These include focusing on implementing pro-competition regulatory reforms to enhance economic stability, gradually reducing interest rates, and enforcing stronger fiscal discipline to manage rising debt levels.
Interestingly, the World Economic Forum (WEF) also released its Chief Economists Outlook on the same day. While it mirrored the OECD’s optimistic stance, spotlighting continued easing of inflation and shifting towards looser monetary policies, it also warned of potential challenges. The WEF highlighted concerns over sustained slow growth and rising political instability, which could make many countries susceptible to economic shocks. Additionally, it raised red flags about the sustainability of public debt, noting that high debt levels could undermine governments’ efforts to stimulate economic growth and leave them inadequately prepared for future downturns.
Moreover, in 2025, significant economic rebounds are anticipated. For instance, Argentina is expected to recover from a projected 4% contraction in 2024 to a 3.9% growth the following year. Similarly, Japan is predicted to reverse its decline, moving from a slight drop this year to 1.4% growth in 2025. Saudi Arabia also appears poised for acceleration, with growth expected to jump from 1% this year to 3.7% in 2025.
Key Economic Projections
| Country | 2024 Growth (%) | 2025 Growth (%) |
|---|---|---|
| India | 6.7 | – |
| Indonesia | 5.1 | – |
| China | 4.9 | – |
| Russia | 3.7 | – |
| Germany | 0.1 | – |
| Argentina | -4.0 | 3.9 |
| Japan | -0.1 | 1.4 |
| Saudi Arabia | 1.0 | 3.7 |
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