OECD warned that increased trade restrictions will hurt global economic performance and raise inflationary pressures
Global GDP growth is projected to slow from 3.2 percent in 2024 to 3.1 percent in 2025, and further to 3.0 percent in 2026, as reported in the latest Economic Outlook published by the Organisation for Economic Co-operation and Development (OECD). This revised estimation reflects the impact of escalating geopolitical tensions, rising trade barriers among G20 economies, and prevailing policy uncertainty, all of which are exerting pressure on both investment and household expenditure.
The OECD has issued a warning that an escalation in trade restrictions would hinder global economic performance while exacerbating inflationary pressures. This adjustment represents a downward revision from the December 2024 forecast, which had anticipated global GDP growth of 3.3 percent for both 2025 and 2026.
Growth trends across major economies
Slower growth is expected across leading economies. In the United States, GDP growth is anticipated to decline to 2.2 percent in 2025 and 1.6 percent in 2026, largely influenced by the effects of tariff increases. The euro area is expected to grow by only 1 percent in 2025 and 1.2 percent in 2026, with uncertainty stifling economic momentum. Countries like Germany, France, and Italy are projected to experience growth below 1 percent in 2025, while Spain is expected to perform better with forecasts of 2.6 percent in 2025 and 2.1 percent in 2026.
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Inflation forecasts amidst economic changes
Inflation is anticipated to moderate alongside the slowdown in economic growth, yet it remains elevated compared to previous expectations. In G20 economies, headline inflation is projected to decrease from 3.8 percent in 2025 to 3.2 percent in 2026. In the euro area, inflation is expected to decline from 2.3 percent in 2024 to 2.2 percent in 2025 and further to 2 percent in 2026. Conversely, in the United States, inflation is forecasted to rise from 2.5 percent in 2024 to 2.8 percent in 2025.
Core inflation and its implications
Core inflation in more than half of the advanced G20 economies, including the United States, is expected to remain above the targets set by central banks through 2025 and 2026, highlighting ongoing inflationary challenges.
The OECD has cautioned that a combination of unexpectedly weak growth and persistent inflationary pressures could result in instability within financial markets. Additionally, it underscored the risks associated with increasing protectionism, newly implemented bilateral tariff measures, and policy uncertainty, which may suppress business investment and trade while driving consumer prices upward.
