OECD again reduces its economic prospects for Europe and improves those of the US.

The OECD once again reduced its expectations for the European economy for this year, with growth below 1% in the large countries except Spain, the exception in the Old Continent, while improving those of the United States, which will grow above 2%.

In its interim Outlook report published this Monday, the Organization for Economic Cooperation and Development (OECD) anticipates a slowdown but very moderate in the global economy, which will expand by 2.9% in 2024, two tenths less than in 2023, for rise again to 3% in 2025.

Beyond the persistence of the divergence between the United States and a Europe affected by high interest rates and the effects of the energy price shock, the authors of the report estimate that China continues to be bogged down by the problems of its real estate sector. , which the authorities try to counteract with successive waves of stimuli.

Its perception of the Asian giant remains as in its previous report, published at the end of November: the increase in gross domestic product (GDP) will remain at 4.7% in 2024, after 5.2% last year, and at 4.2% in 2025.

In the Old Continent, the OECD revises downwards the growth figures for this year of the euro zone (0.6%, three tenths less) and that within that bloc Spain is going to behave better again (1.5%, one tenth more ), although with a very reduced figure compared to the 2.5% in 2023.

For 2025, eurozone GDP growth will once again be corrected downwards: 1.3%, two tenths less than anticipated in November.

US growth surprises again

The other side of the coin is the United States, which after a 2.5% progression last year, fueled by an increase in consumer spending, who resorted to the savings cushion accumulated during the COVID crisis, will remain with a creditable 2.1% this year (six tenths more than predicted in November) and 1.7% in 2025.

As has been happening almost uninterruptedly since the beginning of the invasion of Ukraine in February 2022, the OECD is once again revising upwards its own projections for Russia, which reveals the resilience of its economy in war mode. which has once again surprised the experts.

After having grown by 3.1% in 2023, Russian GDP should rise by 1.8% in 2024, seven tenths more than the OECD had estimated at the end of November. By 2025, a very distant horizon taking into account the uncertainties about the war, they estimate that it will continue to progress but less, 1%.

In large developed countries, inflation fell in 2023 faster than expected (5.4% in the euro zone, 3.7% in the US) and the movement will continue, unless there is some interference, for example if The conflict in the Middle East would escalate and expand geographically and that would affect energy prices.

The authors of the report have calculated that the recent 100% increases in the cost of maritime transport due to the diversion of many ships passing through the Suez Canal towards the Cape of Good Hope and the detour of the African continent to avoid attacks by the Houthis at the entrance to the Red Sea could lead to an increase in the CPI of four tenths after a year.

The OECD recalled that 25% of the world’s oil and 27% of gas pass through the Strait of Hormuz, and that in general the increase in maritime freight “could pose a threat” for world trade, according to the institution’s chief economist, Clare Lombardelli, when presenting the report.

Ignoring the geopolitical risks, which come mainly from that region, the inflation rate will be at the end of 2025 in the United States and the euro zone around the 2% objective set by their central banks.

The OECD considers that central banks have to maintain a prudent monetary policy to ensure that inflationary pressures have been contained on a lasting basis. And although there is room to lower interest rates when that happens, he warns that they will remain high for some time.

“As inflation declines, interest rates can and should fall, but monetary policies must be prudent”Lombardelli stressed.

Regarding the growing problem of the red numbers of public accounts, the OECD advice is more efforts to contain the progression of public spending in the short term and medium-term planning to ensure that the situation is sustainable and can cope with future unforeseen shocks.