Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
The Organisation for Economic Co-operation and Development (OECD) has revised its global economic growth forecast upwards for 2025 to 3.2%, an increase from its June projection of 2.9%, while maintaining its 2026 outlook at 2.9%. This adjustment, reflecting more resilient performance in early 2025, still anticipates a deceleration from the 3.3% growth recorded in 2024. The organization attributed the stronger near-term growth to factors such as robust industrial production, trade, significant investment in artificial intelligence, and fiscal stimulus in China, despite persistent trade headwinds and property market weaknesses.
Regional Outlooks and Economic Drivers
The OECD also upgraded its growth expectations for the United States, projecting 1.8% for 2025, up from 1.6% in June. This forecast, however, represents a notable decline from the 2.8% growth observed in 2024, with a further slowdown to 1.5% anticipated for 2026.
The more resilient growth experienced in the first half of 2025 was largely attributed to a combination of factors. These included a rebound in industrial production and global trade, substantial investment linked to artificial intelligence technologies, and targeted fiscal support measures implemented in China.
Key Risks to the Forecast
Despite the improved near-term outlook, the OECD issued warnings regarding significant risks to the global economy, citing high policy uncertainty and elevated tariffs. US tariff rates, estimated at 19.5% by the end of August, have reached their highest level since 1933, with their full impact beginning to manifest in consumer spending, labor markets, and price dynamics.
Signs of softening are emerging in labor markets across several countries, characterized by increased unemployment and fewer job openings. Concurrently, the disinflationary trend appears to have plateaued, suggesting a potential stickiness in price levels.
Inflation Expectations
The OECD now forecasts headline inflation for G20 countries at 3.4% in 2025, a slight decrease from its June projection of 3.6%. For the United States, the inflation outlook was revised down more significantly, with the OECD predicting a 2.7% rise in prices for 2025, a notable reduction from the previous 3.2% forecast.
Additional Economic Concerns
Additional key risks identified by the OECD include the potential for further tariff increases, a resurgence of inflationary pressures, growing fiscal concerns, and possible repricing in financial markets. The organization also highlighted the high and volatile valuations of crypto-assets as a risk, given their increasing integration with the traditional financial system.
Conversely, the OECD suggested that reductions in trade restrictions or accelerated development and adoption of artificial intelligence technologies could serve to bolster global growth prospects.
Outlook Summary
The OECD’s latest economic assessment points to a nuanced global landscape, characterized by an improved short-term growth outlook tempered by significant geopolitical and financial risks. While key economies like the US show signs of resilience, the persistent threats of trade protectionism, inflation, and financial market volatility underscore the fragility of the recovery.
