While revising its 2024 growth forecast upwards, the OECD highlights significant regional disparities and persistent risks that could derail the recovery.

Upward Revisions for Global and US Growth

The report offers a more positive outlook for global growth in 2024, projecting a 3.1% expansion compared to the previously anticipated 2.9%. This optimism is largely driven by a stronger-than-expected performance from the US economy. The OECD forecasts US growth to reach 2.6% in 2024, exceeding last year's 2.5%.

Eurozone Lags Behind, Faces Upward Battle

However, the report underscores a two-speed recovery with the eurozone lagging significantly. Growth in the eurozone is projected at a meager 0.7% in 2024, although this represents a slight improvement from the earlier forecast of 0.6%. The report attributes this sluggishness to subdued household consumption and weak export growth. While a gradual rebound is expected in 2025, driven by a recovery in domestic demand, the eurozone faces an uphill battle to catch up with other major economies.

Mixed Fortunes for Other Major Economies

The report details a mixed bag of fortunes for other major economies. China's growth is projected to be even stronger than initially anticipated, reaching 4.9% in 2024, thanks to its expansionary fiscal policies. Conversely, Argentina is expected to experience a deep recession in 2024 before a potential rebound in 2025. The OECD attributes this recession to high inflation, fiscal adjustments, and policy uncertainty under the new president's economic reforms.

Türkiye's Growth Slowdown: Tighter Conditions and Inflation

Closer to home, Turkey's economic growth is expected to slow down to 3.4% in 2024 and 3.2% in 2025. The report identifies tighter financial conditions and rising inflation as the primary factors behind this slowdown. While investment activity is expected to remain robust due to reconstruction efforts following the 2023 earthquake, household consumption is likely to be dampened.

Inflation Concerns Remain, Geopolitical Tensions Pose Further Risks

Despite some easing of headline inflation in 2023, the OECD warns that core goods and service price inflation remain elevated in most countries. This persistent inflation, coupled with ongoing geopolitical tensions, particularly in the Middle East, could disrupt energy and financial markets, leading to a potential resurgence of inflation and a faltering of growth.

Policy Recommendations: Fiscal Consolidation, Trade, and AI

The OECD report emphasizes the need for proactive policy measures to navigate these challenges. It calls for fiscal consolidation to address mounting debt and rising expenditure demands. Additionally, the report underscores the importance of strengthening global trade and productivity through the development of resilient global value chains that don't undermine the benefits of open trade. Finally, the OECD recognizes the potential of artificial intelligence (AI) to revive productivity growth and innovation, but highlights the need for careful management to ensure its benefits are widely diffused and don't lead to significant job displacement.

In conclusion, the OECD's latest report offers a glimmer of hope for the global economy, but emphasizes the uneven nature of the recovery and the significant risks that remain. By implementing sound fiscal policies, promoting open trade, and strategically investing in AI, countries can navigate these challenges and build a more sustainable and inclusive economic future. (ILKHA)