The global economy has demonstrated notable resilience throughout the year, but underlying fragilities and escalating policy uncertainty remain significant threats, according to the Organisation for Economic Co-operation and Development’s (OECD) latest Economic Outlook.
The Outlook projects that global GDP growth, after a resilient 3.2% in 2025, will moderate to 2.9% in 2026, before settling at 3.1% in 2027. This continued growth is underpinned by supportive macroeconomic policies and improved financial conditions, fueled by optimism about new technologies and rising AI-enabling investment.
Growth projections for major economies show varied patterns:
United States: GDP growth is projected to decline from 2.0% in 2025 to 1.7% in 2026, before picking up slightly to 1.9% in 2027.
Euro Area: Growth is expected to remain modest at 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027.
China: Growth is projected to ease from 5.0% in 2025 to 4.4% in 2026 and 4.3% in 2027.
Inflation is expected to continue its downward trend. Annual headline inflation in the G20 economies is projected to moderate from 3.4% this year to 2.9% in 2026 and 2.5% in 2027. The OECD anticipates inflation will return to target in most major economies by mid-2027.
OECD Secretary-General Mathias Cormann stressed the urgency of addressing deep-seated risks: “Given the fragilities in the global economy, countries must reinforce their efforts to engage in constructive dialogue that ensures a lasting resolution to trade tensions and a reduction in policy uncertainty,” Mr. Cormann said. “Fiscal discipline is important to address increasing risks that arise from high public debt and higher spending needs due to defence requirements and population ageing. Structural reforms that reduce red tape, simplify regulations, and lower entry barriers in service sectors are key to enhancing competition, innovation, and business dynamism, and ultimately durably strengthen living standards.”
The Outlook cautions that the full effects of higher tariffs are becoming increasingly visible in business costs and consumer prices, particularly in the United States, contributing to a moderation in global trade growth. Furthermore, labour demand is showing signs of weakening, with job openings returning to pre-pandemic 2019 levels.
Central banks are advised to remain vigilant and react promptly to shifts in the balance of risks to price stability. Policy rate reductions should continue in economies where inflation is projected to moderate or remain subdued, provided inflation expectations remain well anchored. The report also highlights financial stability risks posed by the high price volatility of crypto-assets and the growing interconnectedness of non-bank financial institutions with the traditional financial system.
To ensure longer-term debt sustainability and the ability to respond to future shocks, the OECD stresses the need for robust fiscal discipline. This includes stronger efforts to contain and reallocate spending, improve public sector efficiency, and optimise revenues. Spending and tax choices should be aligned to strengthen sustainable economic growth while providing targeted support to those most in need.
