PARIS: The OECD on Wednesday (Sep 25) slightly raised its world economic growth forecast for 2024 but called for higher property and environmental taxes to combat soaring debt in many countries.
In its twice-yearly economic outlook report titled “Turning the Corner”, the Paris-based organisation said global gross domestic product would expand by 3.2 per cent, compared to 3.1 per cent in its previous forecast.
“The global economy is starting to turn the corner, with declining inflation and robust trade growth,” OECD Secretary-General Mathias Cormann said.
“At 3.2 per cent, we expect global growth to remain resilient both in 2024 and 2025,” said the head of the Organisation for Economic Cooperation and Development.
Central banks in the United States and Europe have started to cut interest rates as inflation, which soared after the Covid pandemic and Russia’s invasion of Ukraine, is finally cooling.
The OECD cited “relatively robust” growth in the United States, Brazil, Britain, India and Indonesia. And it raised Russia’s GDP growth forecast by 1.1 percentage points to 3.7 per cent.
But the OECD slightly lowered the outlook for Germany, Europe’s biggest economy, to 0.1 per cent growth and said Japan’s GDP would shrink by 0.1 per cent. Argentina’s economy would have a deeper contraction of four per cent.
DEBT SHOCKS
While it raised the world GDP outlook, the OECD sounded the alarm on rising debt, urging governments to make “stronger efforts” to contain spending and raise revenue.
“Decisive fiscal actions are needed to ensure debt sustainability, preserve room for governments to react to future shocks and generate resources to help meet future spending pressures,” it said.
“Governments face significant fiscal challenges from higher debt and the additional spending pressures arising from ageing populations, climate change mitigation and adaptation measures, plans to raise defence spending, and the need to finance new reforms,” it added.
Global public debt rose to a record US$97 trillion last year, doubling since 2010, according to a United Nations report published in June.
Cormann said at a news conference that countries need “to do more to better control” spending and optimise tax revenue, noting that debt in G20 countries amounted to 113 per cent of GDP last year, compared to 73 per cent in 2007.
“Without sustained action, future debt burdens will rise significantly further and scope to react to future downside shocks will be increasingly limited,” the OECD warned.
“On the revenue side, efforts to eliminate distortive tax expenditures and enhance revenues from indirect, environmental and property taxes are called for in many countries,” the organisation said.
Raising taxes on the world’s wealthiest people and big businesses has come to the fore in recent years.
US presidential candidate Kamala Harris is pushing to raise taxes on corporations and richer households.
The new French government led by conservative Prime Minister Michel Barnier has also put new taxes for the wealthy and big businesses on the table as the country faces a big budget deficit.