The OECD’s latest Interim Economic Outlook reveals a global economy facing increasing uncertainty amid slowing growth, persistent inflationary pressures, and escalating trade tensions. While the global economy has shown resilience in 2024, signs of weakness are emerging, prompting the OECD to revise its growth and inflation projections.
Global growth is forecast to decelerate to 3.1% in 2025 and 3.0% in 2026, with significant variations across regions. The United States is expected to see growth slow from 2.2% in 2025 to 1.6% in 2026, while the Euro area projects growth of 1.0% in 2025 and 1.2% in 2026. China’s growth is anticipated to moderate from 4.8% in 2024 to 4.4% in 2026.
Inflationary pressures remain a concern, with the OECD revising its inflation forecasts upwards. Annual headline inflation in G20 economies is projected at 3.8% in 2025 and 3.2% in 2026, a 0.3 percentage point increase from previous projections. Elevated service price inflation and a resurgence in goods price inflation are contributing factors.
OECD Secretary-General Mathias Cormann emphasized the impact of rising trade restrictions, which are expected to increase production and consumption costs. He stressed the importance of maintaining a rules-based international trading system.
The Outlook highlights several key risks, including potential trade fragmentation, macroeconomic volatility, and the impact of high public debt levels. Unexpected policy changes or deviations from disinflation targets could lead to market corrections and capital outflows, particularly in emerging markets.
In response to these challenges, the OECD recommends that central banks remain vigilant, continuing policy rate reductions only where inflation expectations are anchored and demand is subdued. Fiscal policies must focus on debt sustainability and reallocating spending to support long-term growth. Structural reforms are crucial to boost productivity and enhance technology adoption, with a focus on improving education, skills, and market competition.
OECD Chief Economist Álvaro Santos Pereira noted the potential of Artificial Intelligence (AI) to significantly boost productivity. However, realizing these gains requires policies that facilitate AI adoption and labor reallocation. The OECD’s outlook underscores the need for coordinated global efforts to navigate the current economic uncertainties and foster sustainable growth.
