The OECD has lowered its global growth forecasts in light of the current state of geo-politics.
The economic organistaion’s latest Economic Outlook projects global growth slowing from 3.3 percent in 2024 to 2.9 percent in both 2025 and 2026, down from previous forecasts of 3.3 percent and 3.2 percent, respectively.
OECD Secretary-General Mathias Cormann said the slowdown was expected to be most concentrated in the United States, Canada, Mexico and China, with smaller downward adjustments in other economies.
Secretary-General Cormann said the latest report projected Australia’s economy would grow by 1.5 percent this year and 2.2 percent in 2026, down from forecasts last December for growth of 1.9 percent and 2.5 percent in those years.
He said the global economic prospects were weakening, with substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertainty projected to have adverse impacts.
“GDP growth in the United States is projected to decline from 2.8 percent in 2024 to 1.6 percent in 2025 and 1.5 percent in 2026.”
Secretary-General Cormann said in the euro area, growth was projected to strengthen modestly from 0.8 percent in 2024 to one percent in 2025 and 1.2 percent in 2026, while China’s growth was projected to moderate from five percent in 2024 to 4.7 percent in 2025 and 4.3 percent in 2026.
He said the global economy had shifted from a period of resilient growth and declining inflation to a more uncertain path.
“Our latest economic outlook shows that today’s policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.
“Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth.”
He said the report highlighted a range of risks, starting with the concern that further trade fragmentation, including new tariff hikes and retaliatory actions, could intensify the growth slowdown and trigger significant disruptions in cross-border supply chains.
“Inflation could be more persistent than anticipated, especially in economies facing substantially higher trade costs or with tight labour markets, prompting more restrictive monetary policy and weakening growth prospects.
“Higher debt payments could increase fiscal pressure on governments worldwide, while tighter financial conditions will pose additional risks for low-income countries. Equity markets have recovered from a recent slump but remain volatile.”
Secretary-General Cormann said, on the upside, a reversal of new trade barriers would boost global growth prospects and reduce inflation.
He said a peaceful resolution to the Russia-Ukraine war and of ongoing conflicts in the Middle East could also improve confidence and incentives to invest.
Read the full report: OECD Economic Outlook, Volume 2025 Issue 1. Tackling Uncertainty, Reviving Growth
