CITING RISING TRADE barriers, tighter financial conditions, and mounting policy uncertainty, the Organization for Economic Cooperation and Development (OECD) has downgraded its global economic growth forecast to 2.9 percent for this year and 2026, down from previous outlook of 3.1 percent.
Meanwhile, the lifting of trade barriers, if done immediately or over the short term, may help boost economic growth and ease inflation pressures.
The OECD said in its latest Economic Outlook report that major economies like the United States and China will see their economies slowing down significantly in 2025 and next year.
“The slowdown is concentrated in the United States, Canada, Mexico and China, with other economies expected to see smaller downward adjustments,” the report said.
It stated that the global economic environment is becoming increasingly challenging, identifying factors such as substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence, and elevated policy uncertainty.
“If these trends continue, they could substantially dampen economic prospects. Rising trade costs—particularly in countries implementing new tariffs—are likely to fuel inflation, although this may be partly offset by softer commodity prices,” the OECD report added.
The report further said that inflation globally may remain at higher levels for longer periods than what was expected, which can also affect gross domestic product (GDP) growth.
For the United States, which saw its economy grow by 2.8 percent last year, is expected to sees its GDP increase by 1.6 percent this year and 1.5 percent in 2026, or below the OECD’s previous projections of 2.2 percent this year and 2.6 percent in 2026.
In the Eurozone, GDP growth is expected to remain the same, or increase from 0.8 percent in 2024 to 1 percent this year and 1.2 percent in 2026.
As for the Chinese economy, GDP growth is forecast to slow down to 4.7 percent from 5 percent in 2024, and to 4.3 percent next year, or lower than the previous projections of 4.8 percent for this year and 4.4 percent in 2026.
