A bit more optimistic, but with a touch of concern: The OECD on Monday raised its global growth forecast for 2024 while warning of the risk of a further rise in inflation if Houthi attacks in the Red Sea continue.
Barring a new unexpected geopolitical shock, global growth is expected to be stronger than previous OECD (Organization for Economic Co-operation and Development) forecasts: global GDP is expected to rise by 2.9%, compared to 2.7%, which were estimated in November.
The Paris institution, on the other hand, is closely monitoring the Red Sea, a central hub for world trade with around 12% of traffic. According to the International Monetary Fund, this figure, which has been significantly disrupted since mid-November by rebel attacks in support of the Palestinian cause, has fallen by almost 30% in a year.
To avoid risks, ships bypass this canal by passing through Africa and the Cape of Good Hope, such as the airline CMA-CGM, which announced on Friday that it would again suspend the transit of its boats by sea. Red. This longer and more expensive journey is likely to have an impact on the prices of goods, in addition to the disruptions already occurring in production chains in Europe.
“If it proves sustained,” the rise in sea transport costs could add about a year’s worth of inflation to developed countries by 0.4 points more in 2024, the OECD estimated in its quarterly report.
But it is precisely thanks to the slowdown in inflation, coupled with the reduction in central bank interest rates, that a sustainable economic recovery could see the light of day, according to major international institutes.
250% inflation in Argentina
Currently, “inflation in most G20 countries is expected to return to its target by the end of 2025,” with 2.6% expected this year and 2.4% next year, according to the OECD. These calculations do not include the huge increases expected in Argentina (250.6% in 2024 and 64.7% in 2025 against the background of the sharp devaluation of the peso by the new President Javier Milei) and Turkey taken into account.
Beyond the Houthis, the OECD is watching the Middle East as a whole: “An expansion or escalation of the conflict” could “lead to greater disruptions in maritime transport than currently expected, worsening supply shortages and increasing energy prices,” it said, on the first day a visit by US Secretary of State Antony Blinken to the region to promote a ceasefire between Israel and Hamas.
“This would harm growth” and “directly increase inflationary pressures,” says the OECD.
American locomotive
For now, global growth this year is expected to be supported by U.S. GDP growth, expected at 2.1%, compared with 1.5% in November.
“Fiscal spending and the strength of the labor market should continue to support growth in the country,” the economic institution wrote three days after releasing a report showing twice as many new jobs as expected in January.
At the same time, inflation is expected to slow faster than expected to 2.2% this year, compared to 2.8% in the latest forecasts, which will reassure the US Central Bank (Fed) in its strategy of cutting interest rates President Jerome Powell held on Wednesday deemed it “unlikely” to implement the first interest rate cut in two years in March.
For its part, growth in the euro zone will be weighed down by the first two economies, emphasizes the OECD: France is expected to record GDP growth of 0.6% this year, or 0.2 points less compared to the November forecasts, and Germany is expected to increase its GDP by 0.6% this year, 0.3% or 0.3 points less than previously estimated.
At the continental level, this will lead to an increase in growth of 0.6% in 2024, a decrease of 0.3 points compared to November forecasts, and of 1.3% in 2025, a decrease of 0.2 points corresponds.
The OECD, on the other hand, left its forecasts unchanged for the United Kingdom at 0.7% this year, for China at 4.7% and Japan at 1%, but revised its forecast for Russia significantly upwards to expect 1.8 this year %, or 0.7 points more than expected in November.