OECD revises 2024 global growth forecast to 3.2%, hinting at stability

The global economy is inching closer towards stability, with the impact of aggressive rate hikes by central banks starting to fade, according to the Organisation for Economic Cooperation and Development (OECD)’s latest economic forecast (pdf). The Paris-based organization revised its global growth forecast for 2024 to 3.2%, up 0.1 percentage points. The projection for 2025 was kept at the same level.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

What’s driving the change? A combination of cooling inflation, recovering trade flows, and easing labor market pressures is boosting the economy and allowing central banks to begin to ease monetary policy. If the decline in oil prices persists, headline inflation could fall a further 0.5 percentage points lower than expected next year, the OECD says.

The big picture: Global growth is expected to stabilize despite geopolitical tensions and sluggish labor markets. The OECD now expects the UK economy to expand by 1.1% in 2024, up from its previous estimate of 0.4%, and by 1.2% in 2025, up 0.2% percentage points from its previous estimate. Growth in the euro zone is expected to nearly double from 0.7% growth this year to 1.3% in 2025, as incomes outpace inflation.

Meanwhile, the US and China are up for more modest slowdowns, with interest rate cuts expected to help cushion the US economy’s slowdown to 1.8% next year from 2.6% in 2024, up from a previous 2025 estimate of 1.6%.

THE VIEW ON SAUDI-

The OECD expects Saudi Arabia’s GDP to grow 1.0% this year, marking an upwards revision from its May forecast for a 0.2% contraction. Economic growth is expected to accelerate further next year to hit 3.7% in 2025, although this is a downward revision from the 4.1% figure the OEC had expected in May.

Inflation in Saudi is expected to come in at an average of 1.7% in 2024, down from last year’s 2.3%, before accelerating to 2.0% in 2025. The latest inflation projections are unchanged from May’s forecasts.

How this compares: The IMF forecasts Saudi’s GDP growth at 4.7% next year, although this forecast was based on the assumption that OPEC would begin phasing out its oil production cuts from next month. The oil cartel said earlier this month that it will suspend its planned 180k bpd output hike for October and November. The World Bank maintained in June its forecast that the Kingdom’s economy will grow at 2.5% this year, after slashing its expectations in April from the 4.1% it had penciled in back in January. It also kept its forecast for 2025 unchanged, saying it sees the economy growing 5.9% next year, up from a 4.2% growth forecast cited in January.

The story got ink in Reuters and Bloomberg.

MARKETS THIS MORNING-

Asian markets are largely in the green, with China’s CSI 300 continuing a five-day streak of gains as investors cheer the economic stimulus package introduced by the government earlier this week. Japan’s Nikkei and South Korea’s Kospi are also both up 1.7%. Over on Wall Street, the Dow Jones broke its four-day streak of gains, with futures little changed this morning.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.6% yesterday on turnover of SAR 7.1 bn. The index is up 3.1% YTD.

In the green: SPPC (+10.0%), SIDC (+9.9%) and SFICO (+9.9%).

In the red: Care (-2.5%), Gulf Union Al Ahlia (-2.3%) and Saudi Re (-2.2%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.1% yesterday on turnover of SAR 32.2 mn. The index is up 4.6% YTD.

In the green: Al Mohafaza for Education (+9.2%), Armah (+5.3%) and Balady (+4.5%).

In the red: Banan (-7.8%), Academy of Learning (-6.7%) and Leen Alkhair (-4.6%)

CORPORATE ACTIONS-

Saudi Industrial Development reduced its capital by 66.3% by canceling 13.5 mn shares, according to a statement by Tadawul. The company’s capital is now SAR 135 mn. The move comes as part of a financial restructuring plan engineered to compensate SAR 265 mn in accumulated losses, according to a summary of results (pdf) from an EGA.

Riyadh Steel is undertaking a 10-for-1 stock split, reducing the nominal value of its shares from SAR 10 to SAR 1 a piece and boosting their number tenfold to 70 mn with no change to total capital, the company said in a disclosure to Tadawul. Tadawul set yesterday’s fluctuation limits on the company’s shares based on a share price of SAR 2.15, with all outstanding orders canceled, according to a statement.

The timeline: The share split is effective for shareholders who own shares on 24 September. The adjusted share price will take effect on 25 September, and shareholders will see their increased number of shares reflected in their portfolios by 29 September.