OECD: Global Growth Steady, Faces Challenges Next Year

Global growth showed resilience, exceeding expectations, according to the Organisation for Economic Cooperation and Development (OECD). The investment boom in artificial intelligence (AI) has played a significant role in this positive outlook, countering some negative impacts from recent U.S. tariff increases.

OECD Forecasts for Global Growth

The OECD highlighted that while global growth is anticipated to decelerate slightly, the forecast for major economies remains stable. The organization projects a drop from 3.2% in 2025 to 2.9% in 2026 but expects a rebound to 3.1% in 2027.

Key Economic Predictions

• United States: The growth forecast for 2025 is revised up to 2.0%, from a previous estimate of 1.8%. In 2026, growth is expected to slow to 1.7%, an improvement from 1.5% predicted earlier. Factors aiding this growth include AI investments, fiscal support, and anticipated interest rate cuts from the Federal Reserve.
• China: Growth is expected to remain steady at 5.0% for 2025, an increase from 4.9%. However, a slowdown to 4.4% is predicted for 2026 as fiscal support diminishes and new tariffs take effect.
• Euro Zone: Growth is forecast at 1.3% for 2025, a modest improvement from 1.2%. Expected moderation occurs in 2026, with growth projected at 1.2% due to budget cuts in France and Italy.
• Japan: The economy is predicted to grow by 1.3% in 2025, boosted by strong corporate earnings, before declining to 0.9% in 2026.

Trade and Inflation Outlook

Global trade growth is expected to slow from 4.2% in 2025 to 2.3% in 2026. This decline is attributed to the effects of tariffs impacting investment and consumption significantly. Moreover, trade policy uncertainties hinder recovery prospects.

Inflation trends suggest a gradual return to central bank targets by mid-2027 across major economies. In the U.S., inflation may peak in mid-2026 following tariff impacts but is expected to ease afterward. In China and select emerging markets, inflation is projected to rise slightly as production capacities are utilized more effectively.

Central Bank Responses

Most major central banks are likely to keep borrowing costs stable or reduce them over the next year as inflation pressures diminish. The Federal Reserve may implement slight interest rate cuts by late 2026 unless unexpected inflation from tariffs occurs.

In summary, while the OECD’s outlook paints a steadier picture of global growth bolstered by AI investment, it also underscores the vulnerabilities tied to trade policy and inflationary pressures.