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An unfolding recovery
There are signs that the global outlook has started to brighten, though growth remains modest. The impact of tighter monetary conditions continues, especially in housing and credit markets, but global activity is proving relatively resilient, inflation is falling faster than initially projected and private sector confidence is improving. Supply and demand imbalances in labour markets are easing, with unemployment remaining at or close to record lows. Real incomes have begun to improve as inflation moderates and trade growth has turned positive. Developments continue to diverge across countries, with softer outcomes in many advanced economies, especially in Europe, offset by strong growth in the United States and many emerging market economies.
Global activity has proved surprisingly resilient so far
Global growth in 2023 continued at an annual rate above 3%, despite the drag exerted by tighter financial conditions and other adverse factors, including Russia's war of aggression against Ukraine and the evolving conflict in the Middle East. Global GDP growth is projected at 3.1% in 2024 and 3.2% in 2025, little changed from the 3.1% in 2023. This is weaker than seen in the decade before the global financial crisis, but close to currently estimated potential growth rates in both advanced and emerging market economies.
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Inflation has been falling towards targets, but some pressures persist
Headline inflation fell rapidly in most economies during 2023, driven down by restrictive monetary policy settings, lower energy prices and continued easing of supply chain pressures. Food price inflation also came down sharply in most countries, as good harvests for key crops such as wheat and corn saw prices fall rapidly from highs reached after the start of the war in Ukraine. Core goods price inflation has generally fallen steadily, but services price inflation has been stickier, remaining well above pre-pandemic averages in most countries.
AI has the potential to revive sluggish productivity growth
Artificial intelligence (AI) holds the potential for reviving trend productivity growth and triggering an acceleration of innovation, even if estimates of the impact of AI on productivity are subject to considerable uncertainty. The share of firms making use of AI has risen rapidly, though most of these are large companies. The net effect of AI on aggregate productivity will depend on many factors, including the extent to which new technologies are widely diffused or concentrated in a few leading firms, and the extent to which AI is labour enhancing as opposed to labour replacing.
What should policymakers do?
Country economic snapshots
Event resources
Key data
OECD Economic Outlook, Volume 2024 Issue 1
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There are signs that the global outlook has begun to brighten. Activity remains more resilient than expected, although with considerable divergence across economies, inflation is falling steadily and unemployment remains low. Global growth is projected to remain unchanged in 2024 and strengthen modestly in 2025, with inflation returning to target in most countries by the end of 2025. Risks around the outlook are becoming better balanced, but substantial uncertainty remains.
