The global economy proved more resilient than expected in the first half of 2023, but the growth outlook remains weak. With monetary policy becoming increasingly visible and a weaker-than-expected recovery in China, global growth in 2024 is projected to be lower than in 2023. While headline inflation has been declining, core inflation remains persistent, driven by the services sector and still relatively tight labour markets. Risks continue to be tilted to the downside. Inflation could continue to prove more persistent than anticipated, with further disruptions to energy and food markets still possible. A sharper slowdown in China would drag on growth around the world even further. Public debt remains elevated in many countries.
OECD Economic Outlook, Interim Report September 2023
Confronting inflation and low growth
OECD Economic Outlook
2.7%
Projected global GDP growth for 2024
2.6%
Projected headline inflation across G20 advanced economies in 2024
2.8%
Projected core inflation across G20 advanced economies in 2024
Global growth is expected to remain weak
The world economy is expected to grow by 3.0% in 2023, before slowing down to 2.7% in 2024. A disproportionate share of global growth in 2023-24 is expected to continue to come from Asia, despite the weaker-than-expected recovery in China.
Headline inflation is coming down but core inflation remains persistent
Headline inflation has continued to come down in many countries, driven by the decline of food and energy prices in the first half of 2023. However, core inflation – inflation excluding the most volatile components, energy and food – hasn’t significantly slowed. It remains well above central banks’ targets. A key risk is that inflation could continue to prove more persistent than expected, which would mean interest rates need to tighten further or remain higher for longer.
Monetary policy is working its way through our economies
The tightening of monetary policy is working its way through economies. Alongside the rapid increase of policy rates, interest rates for new corporate loans and new mortgage loans have increased. While the rising borrowing costs are painful for households and firms, dampening households’ and firms’ demand through higher borrowing costs is a standard channel through which monetary policy normally takes effect.
