The global economy has shown resilience in 2024, but signs of weakness are beginning to surface amid slower growth, persistent inflation, and an uncertain policy landscape, according to the OECD’s latest Interim Economic Outlook.
The Outlook projects global growth to slow to 3.1% in 2025 and 3.0% in 2026, with significant disparities across countries and regions.
In the United States, GDP growth is expected to reach 2.2% in 2025 before decelerating to 1.6% in 2026. In the euro area, growth is projected at 1.0% in 2025, slightly improving to 1.2% in 2026. Meanwhile, China’s growth is set to slow from 4.8% in 2024 to 4.4% by 2026.
Although inflation is projected to moderate, it remains higher than initially anticipated. This is due to continued elevated services price inflation, driven by tight labor markets, and the pickup in goods price inflation in some countries, albeit from lower levels. The OECD forecasts annual headline inflation in G20 economies at 3.8% in 2025 and 3.2% in 2026, a revision of 0.3 percentage points higher compared to the December 2024 outlook.
OECD Secretary-General Mathias Cormann noted, “The global economy has displayed real resilience, with steady growth and declining inflation. However, emerging signs of weakness are linked to rising policy uncertainty. Increased trade restrictions will elevate costs for both production and consumption. Maintaining a well-functioning, rules-based international trade system is crucial to keep markets open.”
The Outlook highlights several risks, with one of the primary concerns being the potential for further trade fragmentation, which could undermine global growth prospects.
It also points to the possibility of macroeconomic volatility. Unexpected economic downturns, policy shifts, or deviations from the expected disinflation path could trigger market corrections, significant capital outflows, and currency fluctuations, particularly in emerging markets. High levels of public debt and inflated asset valuations further amplify these risks.
In response to these challenges, the Outlook emphasizes key policy priorities. Central banks must remain cautious due to the heightened uncertainty and the risk that higher trade costs could increase inflationary pressures. Where inflation expectations are stable and trade tensions do not escalate, central banks should consider easing policy rates, particularly in economies where underlying inflation is projected to subside, and aggregate demand growth remains subdued.
Decisive fiscal policies are also necessary to ensure debt sustainability, safeguard the ability to respond to future shocks, and generate the resources needed to address looming spending pressures. Stronger efforts are needed to reallocate spending towards activities that promote long-term growth, within credible medium-term fiscal frameworks tailored to each country’s specific context.
With potential output weakening across both advanced and emerging economies since the global financial crisis, ambitious structural reforms are required. Governments must implement reforms to enhance productivity, promote the adoption of new technologies, boost market competition, and reduce regulatory burdens on businesses.
Education and skills development will also be key to addressing labor and product market constraints that hinder investment and mobility. Artificial Intelligence (AI) offers a unique opportunity to revive productivity growth.
OECD Chief Economist Álvaro Santos Pereira emphasized, “AI is projected to significantly boost labor productivity growth over the next decade, with even greater potential when combined with robotics. However, these gains could be diminished unless policies are in place to accelerate AI adoption and support labor reallocation.”
As the global economy navigates through this period of uncertainty, policymakers face a critical challenge to foster resilience and ensure sustainable growth in the years ahead.
