Published: 10:44, December 1, 2023 | Updated: 11:02, December 1, 2023
Eurozone inflation persists, 2024 slower global growth predicted

European Union flags flap in the wind in the EU Quarter of Brussels, on Sept 20, 2023. (PHOTO / AP)

BRUSSELS - Two back-to-back economic reports have warned about the persistence of inflation in the eurozone despite the minimal decrease in November from the previous month.

According to a flash estimate published on Thursday by Eurostat, the statistical office of the European Union, annual inflation in the eurozone is expected to decrease to 2.4 percent in November from 2.9 percent in October.

In its Economic Outlook published on Wednesday, the Organization for Economic Co-operation and Development (OECD) said that macroeconomic policies were needed to reduce inflation in the eurozone.

Investment needs to be associated with improvements in energy security and decarbonization policies, and prudent fiscal policy is needed to support ongoing monetary policy tightening and to continue rebuilding fiscal space, it said in a chapter dedicated to the eurozone.

This AFP graphic dated Nov 30, 2023 shows the change in the inflation rate for the eurozone since 1997.

European Central Bank (ECB) President Christine Lagarde told the European Parliament on Monday that although she expected the weakening of inflationary pressures to continue, "the medium-term outlook for inflation remains surrounded by considerable uncertainty." Lagarde acknowledged that wages would continue to play a pivotal role in driving domestic inflation.

Concerning monetary policy, Lagarde confirmed that the ECB's future policy rates would be set at "sufficiently restrictive levels for as long as necessary" to meet the bank's target of bringing inflation down to 2 percent.

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Slower global growth forecasts

In its outlook, the Paris-based OECD said it expected the global economy to slow down slightly in 2024 as a result of the tightening of monetary policy, weak trade and lower business and consumer confidence.

The OECD projected global gross domestic product growth of 2.9 percent in 2023, followed by a mild slowdown to 2.7 percent in 2024 and a slight improvement to 3 percent in 2025. Asia is expected to continue to account for the bulk of global growth in 2024-2025, as it has this year.

The European Central Bank (ECB) building is pictured ahead of the meeting of the governing council of the ECB in Frankfurt am Main, western Germany, on July 27, 2023. (PHOTO / AFP)

The organization said it expected consumer price inflation to gradually ease back towards central bank targets in most economies by 2025. Consumer price inflation in OECD countries is expected to decline from 7 percent in 2023 to 5.2 percent in 2024 and 3.8 percent in 2025.

According to a report issued by Oxford Economics on Thursday, the global economy is expected to slow - it will grow by 2 percent in 2024 versus 2.6 percent in 2023. It said that the global post-pandemic shift in demand away from goods and towards services should normalize, providing a structural boost to Asia's exports.

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"The global economy continues to confront the challenges of both low growth and elevated inflation, with a mild slowdown next year, mainly as a result of the necessary monetary policy tightening over the past two years. Inflation has declined from last year's peaks. We expect that inflation will be back at central bank targets by 2025 in most economies," OECD Secretary General Mathias Cormann said in a note published with the outlook.

"To secure stronger growth, we need to boost competition, investment and skills and improve multilateral cooperation to tackle common challenges, like reinvigorating global trade flows and delivering transformative action on climate change," he added.

This picture taken on Oct 10, 2023 in Hamburg, northern Germany, shows pedestrians walking on a bridge on the Elbe river near the harbor. (PHOTO / AFP)

The outlook lays out a series of policy recommendations, underlining the need to continue policies aimed at bringing down inflation, reviving global trade and adapting fiscal policy to meet long-term challenges.

"Governments really need to start confronting the mounting challenges that public finances face, particularly from aging populations and climate change," OECD Chief Economist Clare Lombardelli said.

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"The global economy is grappling with inflation, slowing growth and mounting fiscal pressures. Policymakers must prioritize macroeconomic stability, structural reforms, smart fiscal policies and international cooperation to foster sustainable and inclusive growth," she added.