Global Economy Balances On Recovery Tightrope, Outlook Report Shows: 'This Is Hard'

The global economy, as depicted in the June 2023's OECD Economic Outlook, is exhibiting signs of improvement — albeit with a fragile upturn and substantial downside risks.

There have been positive adjustments in global GDP growth, which is now expected to reach 2.7% in 2023 and 2.9% in 2024, reflecting an upgrade from the previously projected rates of 2.6% and 2.9%, respectively.

Lower energy prices have helped alleviate headline inflation and ease the burden on households, while China's early reopening has provided a much-needed boost to global activity. However, core inflation remains persistent, and the impact of higher interest rates is starting to ripple through the economy.

"Policymakers need to act decisively on macroeconomic and structural policy to deliver stronger and more sustainable growth," OECD chief economist Clare Lombardelli said. "This is hard. Core inflation remains too persistent, debt levels are too high and potential output is too low."

Projections And Revisions For Major Economies

• U.S.: The OECD anticipates a growth rate of 1.6% in 2023 and 1.0% in 2024 for the U.S. The projections have been slightly adjusted upwards from the earlier estimates of 1.5% and 0.9%. The U.S. Fed Funds Rate is expected to peak at 5.25%-5.5% by Q2 2023, with two modest cuts predicted in H2 2024.
• EU: The euro area's growth forecast has been revised upwards, with a projection of 0.9% in 2023 and 1.5% in 2024. These figures indicate a slight improvement from the previous estimates of 0.8% and 1.4%. The OECD sees ECB rates peaking in Q3 2023 and remaining unchanged at 4.25% to end 2024.
• China: China's growth outlook has also received a positive adjustment, with projections of 5.4% in 2023 and 5.1% in 2024. These figures reflect a slightly higher growth rate compared to the earlier forecasts of 5.3% and 4.9%.
• U.K.: The UK's growth prospects have improved, with revised projections of 0.3% in 2023 and 1.0% in 2024. These figures indicate a notable upgrade from the earlier estimates of -0.2% and 0.9%.
• Japan: Japan's growth expectations have been revised downwards, with projected growth rates of 1.3% in 2023 and 1.1% in 2024. These figures represent a downgrade from the previous projections of 1.8% and 0.9%.

Source: OECD

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