The Organisation for Economic Cooperation and Development has raised its growth forecast for the next two years as it expects inflation to fall close to central bank targets.
In its latest economic outlook published Monday, the Paris-based organization said it now expects global GDP growth of 2.9% this year, up from its November forecast of 2.7% growth. It also sees a slight improvement to 3.0% growth in 2025.
Asian countries are expected to drive growth again, with India (6.2% growth in 2024 and 6.5% in 2025), Indonesia (5.1% and 5.2%) and China (4.7% and 4.2%) leading the way.
The forecast for U.S. growth is 2.1% this year and 1.7% in 2025. For Canada, the OECD sees 0.9% growth this year before recovering to 1.9% in 2025.
The outlook pegged inflation in G20 countries to decline from 6.6% in 2024 to 3.8% in 2025. Core inflation is expected to be even lower: 2.5% in 2024 and 2.1% in 2025.
“The global economy has shown real resilience amid the high inflation of the past two years and the necessary monetary policy tightening,” said OECD secretary-general Mathias Cormann in a statement.
“Growth has held up, and we expect inflation to be back to central bank targets by the end of 2025 in most G20 economies.”
Cormann cautioned that both fiscal and monetary policy should remain prudent, even if central banks can begin to lower interest rates this year.
Risks to the outlook include the conflict in the Middle East, particularly threats to shipping in the Red Sea. An escalation could lead to renewed price pressures: according to OECD estimates, a persistent doubling in shipping costs would add 0.4 percentage points to consumer price inflation in the OECD after about a year.