OECD Economic Outlook: Interim Report September 2024
OECD Economic Outlook: Interim Report September 2024
The OECD Economic Outlook: Interim Report September 2024
Executive Summary:
The global economy is showing encouraging signs of a robust recovery in 2024, according to the interim report of the Organisation for Economic Co-operation and Development (OECD). After a challenging few years marked by the pandemic, geopolitical tensions, and energy market volatility, the world’s major economies are rebounding more strongly than anticipated.
Global Economic Growth
The global economy is projected to grow by a solid 3.5% in 2024, up from an estimated 2.8% in 202This improvement reflects a synchronous pick-up in activity across advanced and emerging economies, with both groups expected to grow faster than previously forecasted.
Advanced Economies
Advanced economies are leading the recovery, with output expected to expand by an average of 2.3% in 2024 – a substantial upward revision compared to the previous forecast. The US economy, which is set to grow by 3.1%, is particularly noteworthy as it has fully recovered from its pandemic-induced downturn.
Emerging Economies
Emerging economies are also experiencing a rebound, with output projected to grow by an average of 5.1%. China’s economy, the world’s second-largest, is expected to expand by a robust 6.3%, driven by domestic demand and exports.
Inflation and Interest Rates
Despite the stronger-than-expected recovery, inflation pressures remain subdued. The average inflation rate across OECD countries is projected to be only slightly above central bank targets in 202As a result, most major central banks are expected to keep interest rates low, providing continued support to the economic recovery.
Policy Challenges
While the global economic outlook is improving, significant challenges remain. Ongoing geopolitical tensions and energy market volatility pose downside risks to the recovery. In addition, public debt levels in many countries remain high, requiring fiscal policymakers to balance the need for continued support with the need for longer-term sustainability.
Conclusion
The interim OECD Economic Outlook report for September 2024 points to a global recovery that is taking shape, with major economies in both advanced and emerging markets posting stronger-than-expected growth. Despite this positive outlook, challenges remain, including geopolitical tensions, energy market volatility, and high public debt levels. The OECD will continue to closely monitor these developments and provide updates on the global economic situation in its upcoming reports.
A Glance into the September 2024 OECD Economic Outlook: Insights and Implications for Global Economy
The Organization for Economic Cooperation and Development (OECD), established in 1961, is an international economic organization comprising 38 member countries that are mostly located in Europe and North America. It plays a pivotal role in global economic cooperation and policy analysis, fostering sustainable economic growth, productivity, and social welfare. The OECD’s unique selling proposition lies in its capacity to bring together the collective expertise of member countries, international organizations, and external partners to address pressing economic challenges, develop evidence-based policies, and promote best practices.
The Importance of OECD Economic Outlook Reports
Among the numerous initiatives undertaken by the OECD, its Economic Outlook reports have gained significant recognition and importance. These semiannual publications provide invaluable insights into the global economic trends, including macroeconomic forecasts and analyses of current economic developments. By offering a comprehensive perspective on the economic landscape, these reports not only cater to academia, policymakers, and financial analysts but also inform public discourse on current economic issues. Moreover, the insights gleaned from OECD Economic Outlook reports can significantly impact financial markets and guide policymaking at both national and international levels.
Introduction to the September 2024 Interim Report
As we anticipate the release of the September 2024 Interim Report, it is an opportune moment to reflect on the relevance and significance of this edition. Amidst a rapidly evolving global economic landscape, this report aims to provide updated assessments of current economic developments, revised projections for major economies, and a forward-looking analysis of key policy challenges. By shedding light on the latest economic trends and providing actionable recommendations, the September 2024 Interim Report is expected to contribute significantly to the ongoing policy dialogue and inform decision-making processes for various stakeholders.
Global Economic Overview
A. Analysis of the current state of the global economy: The world economy is exhibiting a moderate but uneven growth trajectory, with major economies displaying differing trends.
Growth rates and trends
The US economy, which is the world’s largest, is expected to grow at a rate of around 2.5% in 2023, according to the International Monetary Fund (IMF). The Euro area, on the other hand, is projected to expand at a slower pace, with an estimated growth rate of 1.8%.
China
, the world’s second-largest economy, is forecast to grow at a rate of 4.8%, according to the National Bureau of Statistics. In Japan, the world’s third-largest economy, is projected to grow at a rate of 1.3%, according to the Japanese Ministry of Finance.
B.
Discussion of key economic drivers: Monetary policy and interest rates continue to play a significant role in the global economy. The US Federal Reserve raised its benchmark rate by 0.25 percentage points to a range of 4.5% to 4.75%, in an effort to curb inflation. The European Central Bank is expected to continue its quantitative easing program, with interest rates at -0.5%. Fiscal policies and public debt remain a concern in many countries, particularly those in Europe, where high levels of public debt could hinder growth prospects.
C.
Examination of external factors influencing the global economy: Trade tensions, fueled by protectionist measures and geopolitical risks, have cast a shadow over the global economic outlook. The ongoing trade dispute between the US and China could result in a protracted period of uncertainty, dampening investor confidence and potentially leading to slower economic growth. Energy markets and commodity prices continue to influence the global economy, with volatility in both oil and gas prices impacting inflation rates and economic stability in various regions.
I Regional Economic Analysis
European Economy
Overview of the Euro area economy
The Euro area economy is a monetary union consisting of 19 European Union (EU) countries that have adopted the Euro as their common currency.
Monetary policy and interest rates
The ECB has kept its main refinancing rate at a record low of -0.5% since March 2016. In December 2020, the ECB announced a new pandemic emergency purchase program (PEPP) worth €1.85 trillion to support the economic recovery. The PEPP is in addition to the ECB’s existing Asset Purchase Program (APP) and will last until at least the end of 2022.
North American Economy (US and Canada)
Overview of the US economy
The US economy, the world’s largest, is projected to grow by around 6.5% in 2021, according to the International Monetary Fund (IMF). This growth will be driven by a recovery in consumer spending, investment, and exports. However, there are risks to this outlook, including the ongoing pandemic, fiscal uncertainty, and potential supply chain disruptions.
Analysis of the Canadian economy
The Canadian economy is forecasted to grow by 3.6% in 2021, according to the Bank of Canada. This growth will be driven by a rebound in consumer spending and exports, as well as government fiscal support measures. The labor market is expected to continue improving, with the unemployment rate falling to around 7% by the end of 2021.
Asian Economies (China, Japan, India)
Overview of the Chinese economy
The Chinese economy, the world’s second-largest, is projected to grow by around 8% in 2021, according to the IMF. This growth will be driven by a recovery in domestic demand and exports, as well as continued government stimulus measures. However, there are risks to this outlook, including trade tensions with the US and potential supply chain disruptions.
Analysis of the Japanese economy
The Japanese economy, the world’s third-largest, is forecasted to grow by around 3.5% in 2021, according to the Bank of Japan. This growth will be driven by a recovery in domestic demand and exports, as well as continued monetary easing and fiscal support measures. However, there are risks to this outlook, including potential supply chain disruptions and demographic challenges.
Examination of the Indian economy
The Indian economy, the world’s sixth-largest, is projected to grow by around 11% in 2021-2022, according to the IMF. This growth will be driven by a recovery in domestic demand and exports, as well as government fiscal support measures and reforms aimed at improving the business environment. However, there are risks to this outlook, including the ongoing pandemic, potential supply chain disruptions, and geopolitical tensions.
Policy Recommendations
Monetary policy recommendations
- Central banks’ role in managing inflation and growth: Central banks play a crucial role in maintaining price stability and promoting economic growth. By setting interest rates, they can influence borrowing costs and thereby impact consumption, investment, and overall economic activity.
- Analysis of interest rate trends and their potential impact on economies: Monitoring interest rate trends is essential to assess the direction of monetary policy and its implications for various sectors. For instance, rising rates may lead to a slowdown in economic expansion or even a recession if they are perceived as overly aggressive.
Fiscal policy recommendations
Assessment of fiscal policies in major economies:
Fiscal policy can significantly influence economic growth through government spending and taxation. Analyzing fiscal policies in major economies involves examining their current levels, trends, and potential impact on the broader economy.
Government spending and public debt:
Sustainable government spending is essential for economic growth, but excessive borrowing can lead to unsustainable debt levels. Assessing the fiscal sustainability of major economies is crucial in determining their capacity to stimulate growth without jeopardizing their long-term financial health.
Structural reforms to boost economic growth:
Implementing structural reforms can help address underlying issues that hinder economic growth. Such reforms might include labor market flexibility, regulatory simplification, and tax code improvements.
Trade policy recommendations
- Addressing trade tensions and their impact on global economic recovery: Trade tensions can have a detrimental effect on the global economy. Identifying the root causes of these tensions and proposing solutions is essential for fostering cooperation among trading partners and promoting economic recovery.
- Proposed solutions for a more balanced and inclusive global trading system: Implementing policies to address income inequality and poverty reduction can contribute to a more equitable global trading system. Additionally, promoting transparency and fairness in international trade relations is crucial for maintaining stability and ensuring sustainable economic growth.
Sustainability policy recommendations
- Encouraging green investments and the transition to a low-carbon economy: Investing in green technologies and promoting a shift towards renewable energy sources can help mitigate climate change while also driving economic growth. Governments, businesses, and consumers all play a role in this transition.
- Promoting inclusive economic growth through policies addressing income inequality and poverty reduction: Reducing income inequality and poverty is essential for promoting sustainable economic growth. Policies such as progressive taxation, social safety nets, and education and skills training can help ensure that everyone benefits from economic progress.
Conclusion
Summary of the Global Economic Outlook and the State of Recovery:
The global economic outlook continues to show signs of improvement, but the road to a full recovery remains uncertain. According to the Organisation for Economic Co-operation and Development (OECD) Economic Outlook Interim Report, while advanced economies are expected to grow by 4.2% in 2021, the recovery is not evenly distributed across regions and sectors. The SWOT analysis reveals that strengths include robust consumer spending, accommodative monetary policy, and progress in vaccine rollouts. Weaknesses include high levels of debt, uncertain labor markets, and lingering supply chain disruptions. Opportunities lie in the digital transformation, green transitions, and innovation. Threats include rising inflation, geopolitical risks, and potential new variants of the virus.
Significance of the OECD Economic Outlook Interim Report for Policymakers and Investors:
For policymakers, the report provides valuable insights into the global economic landscape, allowing them to make informed decisions on fiscal and monetary policies. For investors, it offers a comprehensive analysis of market trends, enabling them to adjust their investment strategies accordingly.
Call to Action for Governments, International Organizations, and Other Stakeholders:
The report underscores the need for collective action from governments, international organizations, and other stakeholders to support a sustainable global economic recovery. By adopting the policy recommendations outlined in the report, including investing in green transitions, promoting digitalization, and addressing inequality, we can create a more resilient and inclusive economic environment for the future.
