OECD's Gloomy 2024 Global Economic Outlook: China's Decline Will Pull Down US, Euro Growth

The Organisation for Economic Co-operation and Development (OECD) has just unveiled its September 2023 economic outlook, and it’s not exactly a sunshine-and-rainbows affair.

The Paris-based organization paints a gloomy picture, forecasting global GDP growth to plod along at 3% in 2023 and a sluggish 2.7% in 2024. The reason? Central banks worldwide are tightening their belts, and turbulence in the Chinese economy isn’t helping matters.

Annual GDP growth in the United States is poised to slow from 2.2% this year to a mere 1.3% in 2024, as tighter financial conditions are putting the brakes on demand.

Table: OECD Growth Estimates By Country (September 2023 Interim Economic Outlook)

Country	2022	2023 Interim EO Projections	Difference from June EO	2024 Interim EO Projections	2024 Difference from June EO
World	3.3	3.0	0.3	2.7	-0.2
G20¹	3.1	3.1	0.3	2.7	-0.2
Australia	3.7	1.8	0.0	1.3	-0.1
Canada	3.4	1.2	-0.2	1.4	0.0
Euro area	3.4	0.6	-0.3	1.1	-0.4
Germany	1.9	-0.2	-0.2	0.9	-0.4
France	2.5	1.0	0.2	1.2	-0.1
Italy	3.8	0.8	-0.4	0.8	-0.2
Spain²	5.5	2.3	0.2	1.9	0.0
Japan	1.0	1.8	0.5	1.0	-0.1
Korea	2.6	1.5	0.0	2.1	0.0
Mexico	3.9	3.3	0.7	2.5	0.4
Türkiye	5.5	4.3	0.7	2.6	-1.1
United Kingdom	4.1	0.3	0.0	0.8	-0.2
United States	2.1	2.2	0.6	1.3	0.3

Euro Area And Recession Pals

Over in Europe, the Euro Area is bracing for a marked slowdown, with GDP growth expected to crawl to 0.6% in 2023.

Notably, Germany and Argentina are the only two G20 economies facing a recession in 2023.

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Inflation: A Tale Of Goods And Services

“Risks remain tilted to the downside,” warns the OECD. There’s uncertainty about the strength and speed of monetary policy transmission and the persistent specter of inflation.

Policy interest rates are hovering at or near their peaks in most economies, including the U.S. and Eurozone, with policymakers treading cautiously as the effects of higher interest rates become apparent, the OECD says.

While inflation for goods is showing a declining trend, the same cannot be said for services, as their price pressures remain stickier than expected. Housing rental prices, especially in the U.S., are exhibiting a high degree of inertia.

China’s Economic Slowdown: A Global Worry

Let’s talk about the elephant in the room: China. Its slowing economic activity raises concerns, given its critical role in global growth, trade, and financial markets. With mounting debt and a troubled real estate sector, China’s economic challenges could have a domino effect, lowering global GDP growth by 0.6 percentage points.

In a worst-case scenario with a 10% drop in global equity prices and higher investment risks, global GDP growth could plummet by 1.1%, and world trade volumes would fall, the OECD warns.

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