Gross domestic product growth in the eurozone is set to almost double to 1.5pc in 2024 as the impact of soaring energy prices fade and inflation declines, according to the OECD Economic Outlook interim report.

Following growth of 3.2pc in 2022, the world economy is on course to expand 2.6pc this year, a 0.4pc rise from its last Economic Outlook late last year.

The organisation predicted in November that the Irish economy would grow by just 0.9pc in 2023, down from 8pc modified domestic growth last year.

However, the organisation warned the recovery remains ‘fragile’ and that further interest rate increases are still needed across many economies, including the euro area. 

Core inflation remains elevated due to strong service price increases, higher margins in some sectors and ongoing cost pressures due to tight labour markets.

The OECD said that inflation is expected to moderate gradually over 2023 and 2024, remaining above central objectives in most countries until the latter half of next year.

The European Central Bank raised its key rate by half a percentage point on Thursday. “Inflation is projected to remain too high for too long,” ECB president Christine Lagarde said yesterday.

“We are not waning on our commitment to fight inflation and we are determined to return inflation back to the 2pc target in the medium term.”

Following a week of market turmoil, the organisation also added that the impact of the changes in monetary policies are difficult to gauge and continue to lead to the exposure of “financial vulnerabilities from high debt and stretched asset valuations,” including in some specific financial market segments.

Pointing to the collapse of Silicon Valley Bank earlier this month, the OECD said that action is required to reduce the risk of “broad financial contagion” from similar events.

The OECD also called for a more targeted approach to fiscal support as a result of soaring food and energy prices, pointing to a need to offer supports to those most in need.

“Better targeting and a timely reduction in overall support would help to ensure fiscal sustainability, preserve incentives to lower energy use, and limit additional demand stimulus at a time of high inflation,” it said in the report.

The European Union said this week that pandemic and energy supports have helped the operations of businesses in recent years but cannot last.

“This success should not blind us to some of the serious consequences of a prolonged period of fiscal support,” Maarten Verwey, the European Commission’s director general for economic and financial affairs wrote in the Irish Independent.

“Public debt has increased, in some cases to very high levels. This now needs to be addressed.”

The risk of a critical shortage of energy supplies has “diminished, but not disappeared” in Europe, the OECD said, with gas storage levels now at near record highs for this time of year due to higher than expected temperatures throughout the window.

While the OECD pointed to a “fragile recovery” in the year ahead, the war in Ukraine remains a key concern for the global economy, it added.

The Russian economy is set to contract by 2.5pc this year, joining the UK as one of the only two major economies to slow in 2023. 

UK GDP is set to dip by 0.2pc in 2023 followed by a 0.9pc growth next year.