The global economy is projected to lose momentum, with GDP growth expected to slow from 3.3% in 2024 to 2.9% in both 2025 and 2026, according to the latest Economic Outlook released by the Organization for Economic Cooperation and Development (OECD) on Tuesday.
The OECD attributed the downward revision to a combination of rising trade barriers, tighter financial conditions, weakening business and consumer confidence, and heightened policy uncertainty. It warned that sustained trade fragmentation—such as new tariffs and retaliatory measures—could further disrupt cross-border supply chains and dampen growth.
The report mentions that inflationary pressures are also expected to persist, particularly in countries increasing tariffs, though falling commodity prices may offset some of the impact. Annual headline inflation in G20 economies is forecast to ease from 6.2% in 2024 to 3.2% by 2026.
The slowdown is anticipated to be most pronounced in the United States, Canada, Mexico, and China. U.S. GDP growth is projected to decline from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026, while China's growth is forecast to moderate from 5.0% to 4.3% over the same period.
In the euro area, growth is projected to strengthen modestly from 0.8% in 2024 to 1.0% in 2025 and 1.2% in 2026, the report added.
OECD Secretary-General Mathias Cormann emphasized that the global economy has entered a more uncertain phase. “Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue,” he said, urging cooperation to preserve the benefits of open, rules-based trade.
The report also flagged long-term challenges such as rising public debt burdens, volatile equity markets, and constrained fiscal space, especially in low-income economies. On a positive note, it said that a reversal of trade restrictions or peaceful resolutions to ongoing geopolitical conflicts could improve growth prospects.
To counteract these pressures, the OECD called for structural reforms to revive investment, innovation, and productivity. Chief Economist Álvaro Santos Pereira noted that public and housing investment remains weak, stressing the need for bold policy action to build a stronger, more resilient global economy.
Source: OECD
