OECD warns of trade risks, forecast 3.3% growth in 2025
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The news: The OECD forecasts global growth of 3.3% annually for 2025 and 2026, supported by easing inflation and fiscal stimulus, but warned of risks from trade tensions, protectionism and fiscal challenges.
The numbers: The new estimate from the Organisation for Economic Co-operation and Development was slightly higher than the 3.2% growth expectation it published in September for this year and next.
It said it forecast the US economy will grow 2.4% in 2025, while China slows to 4.4% by 2026 due to weak consumption and its real estate struggles.
In Europe, growth is expected to improve modestly, though Germany lags at 0.7%. Meanwhile, Australia is expected to grow at 1.9% in 2025 and 2.5% the year after.
India was described as a “shining light” for growth, while persistent budget deficits in France and the US were flagged as concerns, with the debt burden of G7 nations forecast to rise to 117% of GDP by 2026.
The context: The OECD emphasised the importance of fiscal discipline and structural reforms, particularly in countries like Germany.
While the OECD supported advanced-world central banks to maintain easing, it called for that to be done at a cautious pace to avoid disrupting inflation expectations or financial markets.
Inflation in OECD countries was expected to ease further to 3.8% in 2025 and 3% in 2026, down from 5.4% this year.
The OECD said its forecasts assumed no changes in global trade practices, warning that trade tensions could disrupt supply chains and hinder global growth.
This comes as US President-elect Donald Trump has called for tariff hikes on key trade partners.
What they said: “The global economy has proved resilient. Inflation has declined further towards central bank targets, while growth has remained stable,” OECD Secretary-General Mathias Cormann said in a statement.
“Significant challenges remain. Geopolitical tensions pose short-term risks, public debt ratios are high and medium-term growth prospects are too weak. Policy action needs to safeguard macroeconomic stability – through monetary policy easing that is carefully calibrated to ensure inflationary pressures are durably contained and through fiscal policy that rebuilds fiscal space to preserve room to meet future spending pressures.”
The sources: OECD, The Wall Street Journal, Bloomberg
