OECD: Global Growth to Remain Resilient in 2025-2026 Amid Key Risks

Global growth is expected to show resilience in 2025 and 2026, even in the face of notable challenges, as reported by the Organisation for Economic Cooperation and Development (OECD). The OECD’s recent Economic Outlook anticipates a global GDP growth rate of 3.3 percent for both years, a slight increase from 3.2 percent in 2024. Inflation rates within OECD countries are projected to decrease further from 5.4 percent in 2024 to 3.8 percent in 2025 and down to 3 percent in 2026, fueled by the continued restrictive monetary policies adopted by most nations.

According to the OECD’s findings, nearly half of advanced economies and almost 60 percent of emerging markets have already brought headline inflation down to their central bank targets. Labor markets are gradually stabilizing, with unemployment rates remaining low compared to historical benchmarks. Despite strong nominal wage increases and a trend toward disinflation that has improved real household incomes, the growth of private consumption remains relatively weak across many countries, reflecting a dip in consumer confidence.

On the trade front, global volumes are on the rebound, with a projected growth of 3.6 percent expected in 2024. However, growth prospects vary widely by region. In the United States, GDP growth is projected to be 2.8 percent in 2025, before slowing to 2.4 percent in 2026. The euro area is benefitting from increased household incomes, tight job markets, and a drop in policy interest rates, leading to a forecast of 1.3 percent GDP growth in 2025 and 1.5 percent in 2026. Japan’s economy is expected to expand by 1.5 percent in 2025, but growth is likely to taper off to 0.6 percent in 2026. China is also predicted to slow, with GDP growth rates of 4.7 percent in 2025 and 4.4 percent in 2026.

The Outlook points to ongoing uncertainties that could disrupt this projected growth. An escalation of conflicts in the Middle East might have repercussions for energy markets, potentially affecting both confidence and growth. Additionally, increasing trade tensions could hinder trade expansion. Unexpected downturns in growth or disinflation trends could trigger significant corrections in financial markets. Conversely, growth surprises could also occur. For instance, if consumer confidence rebounds quickly and purchasing power improves, spending may see a boost. Similarly, a swift resolution to major geopolitical tensions could enhance market sentiment, potentially aided by falling energy prices.