OECD raises 2023 global growth outlook, cuts 2024

Workers build electric buses at the BYD electric bus factory in Lancaster, California, U.S., July 1, 2021.REUTERS/Mike Blake

PARIS  – 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 percent last year, global gross domestic product growth is on course to slow to 3 percent this year, the Organization for Economic Development said in the latest update of its forecasts for major economies.

While that was an upgrade from 2.7 percent in the OECD’s June outlook, global growth was expected to slow to 2.7 percent in 2024 – down from its estimate of 2.9 percent in June.

The Paris-based body said it now expected the U.S. economy to grow 2.2 percent this year rather than the 1.6 percent 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 percent, though that was better than the 1 percent 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.

The OECD forecast that the Chinese economy would slow from 5.1 percent this year to 4.6 percent next year as momentum from the end of COVID restrictions fades and the property market struggles. In June, the OECD had forecast 5.4 percent growth this year and 5.1 percent next year.

The OECD cut the euro zone’s growth outlook this year to just 0.6 percent from 0.9 percent in June, but forecast it would pick up next year to 1.1 percent – down from 1.5 percent 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.