The Organisation for Economic Co-operation and Development (OECD) slightly raised its global economic growth forecast for 2024 on Wednesday, while urging countries to implement higher property and environmental taxes to address the mounting debt many nations are facing.
In its economic outlook report titled "Turning the Corner," the Paris-based organization said global growth is in the process of stabilizing as the drag from central bank rate hikes fades and falling inflation boosts households' incomes.
The world economy is projected to grow by 3.2% both this year and next year, according to the OECD forecast, nudging up its 2024 forecast from 3.1% previously while leaving 2025 unchanged.
"Global output growth has remained resilient and inflation has continued to moderate," it said in the twice-yearly report.
Central banks in the United States and Europe have started to cut interest rates as inflation, which soared after the COVID-19 pandemic and Russia's invasion of Ukraine, is finally cooling.
As the lagged impact of tightening evaporates, rate cuts would boost spending going forward while consumer spending benefitted from lower inflation, the OECD said.
If a recent decline in oil prices persists, global headline inflation could be 0.5 percentage points lower than expected over the coming year, it noted.
With inflation heading toward central bank targets, the OECD projected that the U.S. Federal Reserve's (Fed) main interest rate would ease to 3.5% by the end of 2025 from 4.75%-5% currently, and the European Central Bank (ECB) would cut to 2.25% from 3.5% now.
The OECD cited "relatively robust" growth in the United States, Brazil, Britain, India and Indonesia. It raised Russia's GDP growth forecast by 1.1 percentage points to 3.7%.
U.S. growth is expected to slow from 2.6% this year to 1.6% in 2025, though rate cuts would help cushion the slowdown, the OECD said, trimming its 2025 estimate from a forecast of 1.8% in May.
The Chinese economy, the world's second-biggest, is seen slowing from 4.9% in 2024 to 4.5% in 2025, as government stimulus spending is offset by flagging consumer demand and a real estate rut.
The eurozone would help make up for slower growth in the two biggest economies next year, with the 20-nation bloc's growth forecast to nearly double from 0.7% growth this year to 1.3% as incomes grow faster than inflation.
The OECD slightly lowered the outlook for Germany, Europe's biggest economy, to 0.1% growth and said Japan's GDP would shrink by 0.1%. Argentina's economy would have a deeper contraction of 4%.
The U.K. economy is seen expanding by 1.1% in 2024 amid high wage growth and 1.2% in 2025, up from OECD's May forecasts for 0.4% this year and 1% next year.
Türkiye's GDP is expected to expand by 3.2% this year, down from the organization's earlier estimate of 3.4%. The outlook for 2025 was revised down by one percentage point to 3.1%.
To ensure inflation continues to decline toward the targeted level, the OECD said that Türkiye should maintain a tight monetary policy through 2025.
While inflation is expected to decrease throughout 2024 and 2025, it will likely remain in double digits during this period, it noted. Annual inflation dipped below 52% in August, compared to its peak of 75% this May.
While it raised the world GDP outlook, the OECD sounded the alarm on rising debt, urging governments to make "stronger efforts" to contain spending and raise revenue.
"Decisive fiscal actions are needed to ensure debt sustainability, preserve room for governments to react to future shocks and generate resources to help meet future spending pressures," it said.
"Governments face significant fiscal challenges from higher debt and the additional spending pressures arising from aging populations, climate change mitigation and adaptation measures, plans to raise defense spending and the need to finance new reforms," it added.
Global public debt rose to a record $97 trillion last year, doubling since 2010, according to a United Nations report published in June.
"Without sustained action, future debt burdens will rise significantly further and scope to react to future downside shocks will be increasingly limited," the OECD warned.
"On the revenue side, efforts to eliminate distortive tax expenditures and enhance revenues from indirect, environmental and property taxes are called for in many countries," the organization said.
Raising taxes on the world's wealthiest people and big businesses has come to the fore in recent years.
U.S. presidential candidate Kamala Harris is pushing to raise taxes on corporations and richer households.
The new French government led by conservative Prime Minister Michel Barnier has also put new taxes on the wealthy and big businesses on the table as the country faces a big budget deficit.
