The global economic prospects are weakening with substantial barriers to trade, tighter financial conditions, and heightened policy uncertainty projected to have adverse impacts on growth, according to the June economic outlook report of the Organisation of Economic Co-operation and Development (OECD).
The report indicates that the global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path. The current policy uncertainty is weakening trade and investment and curbing growth prospects. Rising trade costs - particularly in countries implementing new tariffs - are likely to fuel inflation. The report stated that inflation may also stay elevated for longer than anticipated. On the upside, an early reversal of recent trade barriers could boost economic growth and help ease inflationary pressures. A peaceful resolution to Russia’s war of aggression against Ukraine and of ongoing conflicts in the Middle East could also improve confidence and incentives to invest.
Global GDP growth is now projected to be 2.9 percent in both 2025 and 2026, down from 3.3 percent projected in the December economic outlook report. The slowdown is expected to be most concentrated in the US, Canada, Mexico and China, with smaller downward adjustments in other economies.
GDP growth in the US is forecast to decline from 2.8 percent in 2024 to 1.6 percent in 2025 and 1.5 percent in 2026. In the euro area, growth is projected to strengthen modestly from 0.8 percent in 2024 to one percent in 2025 and 1.2 percent in 2026. China’s growth is projected to moderate from five percent in 2024 to 4.7 percent in 2025 and 4.3 percent in 2026. In the OECD countries, GDP growth is forecast to be 1.4 percent in 2025 and 1.5 percent in 2026.