PARIS - Down from 3.3% in 2022, global GDP growth is projected to stabilise at its lowest annual rate since the global financial crisis (with the exception of the 2020 pandemic period). Only modest pick-up to 2.9% is expected in 2024 but the upturn remains fragile, according to the OECD.

Restrictive monetary policy will constrain demand growth for some time to come, as the full effects of 2022 policy tightening will only appear later this year or in the early part of 2024.

Annual OECD GDP growth is projected to be below trend in both 2023 and 2024, although it will gradually pick up through 2024 as inflation moderates and real incomes strengthen.

Helped by the decline in energy prices over the past few months, average annual headline inflation in the OECD is now projected to fall relatively quickly from 9.4% in 2022 to 6.6% in 2023 and down to 4.3% in 2024.

Headline inflation is falling but core remains persistent

Core inflation – excluding food and energy – remains persistently high in many OECD countries, projected to ease from 6.6% in 2022 to 6.5% in 2023, and to 4.5% in 2024 on an annual average basis.

Many governments rolled out extensive support to cushion the effects of high energy and food prices on households. Ongoing fiscal policy support and continued employment growth have helped to limit the overall drop in household disposable income in some countries, especially in Europe.

But as the recovery takes hold, fiscal support should be scaled back and better targeted to vulnerable households inadequately covered by the general social protection system.

Careful choices are needed to preserve scarce budget resources for future policy priorities, particularly for the much needed investments in clean energy and energy infrastructure.

Gradually unwinding fiscal support will help reduce the burden on monetary policy, strengthen buffers against future crises, and prepare for longer-term challenges.