By Ben Eguzozie
- 2.9% global GDP growth in 2024
- India sees biggest growth of 7%
- US, China to drop 1.0%; 5.1% (2024)
- Real wages to stop declining in 2023
- S’Africa on 1.0% growth as Africa, Nigeria missing
The OECD, in its June Economic Outlook, says global economic developments have begun to improve, helped by lower energy prices, improving business and consumer sentiment, and the reopening of China, but it highlighted that the upturn is fragile and the recovery is set to remain weak by past standards, with the effects of tighter monetary policy increasingly being felt.
“Global (GDP) growth has stabilised, but the improvement is still fragile,” the report says.
“Lower energy prices are helping to bring down headline inflation and ease strains on household budgets, and the earlier-than-expected reopening of China has provided a boost to global activity. However, core inflation is proving persistent and the impact of higher interest rates is increasingly being felt across the economy,” the OECD Outlook warned.
The OECD, describing the path to 2024 as “a long unwinding road”, said projected global real GDP growth in 2023 will be 2.7% year-on-year, the lowest annual rate since the global financial crisis, with the exception of the 2020 pandemic period. A modest improvement to 2.9% is foreseen for 2024.
Also, “annual OECD GDP growth is projected to be below trend in both 2023 and 2024, although it will gradually pick up through 2024 as inflation moderates and real incomes strengthen,” the Outlook predicted. Also, the OECD Group projected headline inflation in 2023 and 2024 are 6.6% and 4.3% respectively.
Major five economies of the world (India, China, Indonesia, Türkiye and Saudi Arabia) will report varying dimensions of real GDP growth in 2024. India tops with a 7.0%, up from 6.0% in 2023; China, in second placing, will see economic downside with 5.1% real GDP drop, from 5.4% this year; Indonesia will climb to 5.1%, from 4.7% this year; Turkey (still counting on recent earthquake aftershocks see an uptick of 3.7%, from 2023’s 3.6%. Saudi Arabia will close the top five real GDP growth of 3.6% next year, from 2.9% this year.
The U.S., the world’s biggest economy with $23.32 trillion GDP size, will drop to 1.0% next year, from this year’s 1.6%.
Russia, the aggressor which launched a destructive war against Ukraine last year, will continue to see negative real GDP performance. Its economy will move from -1.5% this year to -0.4% next year. But European counterpart Germany will wriggle out from negative -0.0% to see growth of 1.3% in 2024.
Africa, Nigeria missing in survey
Africa, the continent with a population of 1.3 billion and a combined GDP size of $3 trillion, is largely missing in the OECD Economic Outlook. Nigeria, the continental economic giant, still in the throes of an eight-year disastrous administration of former president Muhammadu Buhari; and reeling under a heavy debt servicing rate of 96.3%, did not feature in the OECD Outlook. Only South Africa was classed, with a real GDP growth year-on-year of 1.0% in 2024, up from 0.3% this year.
The OECD June 2023 Economic Outlook also underlined a range of risks, including the possibility that inflation could prove more persistent than projected; and that the impact of higher interest rates on financial markets and economic activity could be stronger than expected.
“Underlying inflation pressure remains high. Headline inflation has fallen in most economies in recent months due to the downturn in energy prices, even though food and services prices have continued to rise rapidly. Core inflation remains stubbornly high,” the report said.
The OECD outlook recommended that “well-calibrated policy measures are required to unwind the impact of the recent sequence of negative shocks to the global economy, restore economic stability, and strengthen prospects for strong, inclusive and sustainable improvements in living standards”.
In particular, national governments across the world should maintain restrictive monetary policy to combat inflation. “Monetary policy needs to remain restrictive until there are clear signs that underlying inflationary pressures are durably reduced. This may require additional interest rate increases in economies in which high core inflation is proving persistent”, the OECD June outlook said.
Another is to phase out and target fiscal support. “With global food and energy prices having declined and minimum wages and welfare benefits having increased to take account of past inflation, fiscal support to mitigate the cost of living crisis should increasingly become targeted toward vulnerable households inadequately covered by the general social protection system.
Thirdly, the outlook recommended that governments should prioritise pro-growth spending and supply-boosting structural reforms. “Public debt levels and budget deficits are high. Many also face rising future spending pressures from ageing populations, the green transition and higher interest payments on public debt. These pressing future challenges and the longer-term decline in trend growth rates point to a need for ambitious supply-boosting structural reforms and prioritising pro-growth public spending”.