As rising interest rates weigh on business activity and China continues to struggle with a lackluster recovery from the pandemic, global growth is forecasted to remain anemic, according to the Organization for Economic Cooperation and Development (OECD).

The OECD downgraded its global economic forecast for 2024 in its latest Economic Outlook report, forecasting a reduction in growth to 2.7% next year, marking a 0.2% reduction from its June estimate, following on from an already “sub-par” 3% expansion this year.

According to the Paris-based organization, next year the report predicts the world will see its weakest yearly growth since the global financial crisis, with the exception of 2020 when the pandemic hit.

On Tuesday OECD chief economist Clare Lombardelli told reporters, “While high inflation continues to unwind the world economy remains in a difficult place. We’re confronting the double challenges of inflation and low growth.”

The OECD warned that elevated interest rates which are designed to curb inflation are weighing on the economy, and are expected to continue to constrain the global economy. At the same time, price growth continues to be a problem, leaving, “limited scope for any rate cuts until well into 2024.”

The OECD said, “After a stronger-than-expected start to 2023, helped by lower energy prices and the reopening of China, global growth is expected to moderate. The impact of tighter monetary policy is becoming increasingly visible, business and consumer confidence have turned down, and the rebound in China has faded.”

In the report, the growth forecast for the euro area this year was slashed, as the OECD warned that the German economy in 2023 would contract by 0.2%. That would mean the biggest economy in the EU would be the only G20 state, outside of Argentina, to undergo a recession.

In many countries, a surge in the price of oil has also been driving price increases, especially nations that are heavily reliant on crude imports, according to Lombardelli.

She said, “Oil prices will continue to be potentially volatile through this period. That’s why we’ve highlighted it as one of the risks.” 

Since May, crude prices have risen by 25%, and the economist warned they will continue to weigh on household budgets.