OECD cuts growth for Italy in 2024 to 0.5%. Tariffs and conflicts weigh on global economy

Very gradual is the descent of the government debt, which would rise from 134.7 % in 2023, to 135.2 % this year, and then fall to 134.3 % in 2025 and 133.2 % in 2026. The deficit would rise from 3.5% in 2024, to 3.2% in 2025 and 2.8% in 2026. It was 7.2% in 2023.

The updated OECD estimates also confirm the crisis of the German locomotive: zero growth is forecast for 2024 (but the leading German economic institutes put a contraction in mind), with a rebound to 0.7 per cent in 2025.

The good momentum of the Spanish economy persists, but it will slow down from 3% this year to 2.3% in 2025. France, in the midst of a political crisis, remains clinging to growth of around 1% this year and next, with public debt rising towards 120% of GDP in 2026 and the deficit at 6.1% this year.

Recession for Austria and Ireland, both contracting by 0.5% in 2024.

The good news for the Eurozone comes on the inflation front: the core component is expected to fall from 2.9% in 2024, to 2.4% in 2025 and again to 2% the following year. The rate should in turn fall to 2% towards the end of 2025.

The OECD predicts a slight deceleration for the US economy, while waiting to see the effects of Trump's policies. For 2024, growth will be 2.8%, but will slow to 2.4% in 2025. Recent strong migration flows, the OECD points out, have expanded the production potential of the US economy, while the slowdown in labour force growth will cool private consumption. Support for investment will come from the loosening of monetary policy. The OECD forecasts interest rates at 3.25-3.5% by the first quarter of 2026, when inflation will converge to 2%. Unabated is the run-up of public debt, at 130% of GDP in 2026, with deficits at 8%.

China continues to see its growth rates fall: below 5% this year, to 4.7% in 2025. The OECD estimates that its economy contributed more than a quarter of global economic growth in 2024 and forecasts a similar contribution in 2025 and 2026. This is a measure of the importance of the China trend: for every percentage point of growth lower than projected, the direct effect on global GDP is about 0.2 percentage points.

Exit from recession, in 2025, for Japan: GDP growth is expected to rebound to 1.5%, after the 0.3% contraction expected in 2024, thanks to rising real wages, rapid profit growth and government subsidies.

India continues to expand at rates of just under 7% for the two years.

The whole picture could change for the worse if conflicts in the Middle East or Ukraine escalate. Damage to energy infrastructure could alter prices and cause investors to reassess the global economic outlook. "A sharp and unexpected rise in oil prices," writes the OECD, "would sharply increase global inflation and hit growth, especially in importing countries. Weakening real incomes and tightening financial conditions would hit consumption and investment".

The other big unknown on the global economy is protectionism. Trade-restrictive measures continue to increase and now affect 12.7% of G20 countries' imports, more than three times as much as in 2015. At the same time, restrictions on foreign investment are increasing. An escalation on this front could 'raise costs and prices, discourage investment, weaken innovation and ultimately reduce growth'.