XINHUA – Global gross domestic product (GDP) growth is projected to moderate from 3.2 per cent in 2024 to 3.1 per cent in 2025 and three per cent in 2026, the Organization for Economic Cooperation and Development (OECD) said in its latest Economic Outlook.
The downward revision from its previous forecast reflects “higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending”, the OECD noted.
The organisation warned that further increases in trade barriers would dampen global growth and contribute to inflationary pressures. In its December 2024 forecast, the OECD had projected global GDP growth at 3.3 per cent for both 2025 and 2026.
Economic growth is expected to slow in major economies. In the United States (US), GDP growth is projected to decline to 2.2 per cent in 2025 and 1.6 per cent in 2026 as tariff hikes take effect. In the euro area, GDP growth is forecast at one per cent in 2025 and 1.2 per cent in 2026, with heightened uncertainty keeping expansion subdued.
Germany, France and Italy are all expected to see economic growth below one per cent in 2025, while Spain’s economy is projected to expand by 2.6 per cent in 2025 and 2.1 per cent in 2026.
Inflation is expected to remain higher than previously anticipated, though still moderating as economic growth softens.
In G20 economies, headline inflation is projected to decline from 3.8 per cent in 2025 to 3.2 per cent in 2026. In the euro area, inflation is forecast to drop from 2.3 per cent in 2024 to 2.2 per cent in 2025 and two per cent in 2026.
However, in the US, inflation is expected to rise from 2.5 per cent in 2024 to 2.8 per cent in 2025. Core inflation in more than half of the advanced G20 economies, including the US, is projected to remain above central bank targets in 2025 and 2026.
The OECD cautioned that a resurgence of inflation or weaker-than-expected economic growth could lead to financial market volatility.
It also warned that new bilateral tariff measures and rising policy and geopolitical uncertainty would weigh on business investment and trade, while increased trade costs could put further upward pressure on consumer prices.
To mitigate the negative effects of trade tariffs, the OECD urged central banks to remain vigilant in managing inflation risks and called for ambitious structural reforms to support economic growth.
