The global economy is poised for a slowdown as persistent policy uncertainty and rising trade barriers hinder demand. According to the latest OECD Interim Economic Outlook, growth is expected to decrease from 3.3% in 2024 to 3.2% in 2025 and further to 2.9% in 2026. This decline is attributed to the depletion of early stockpiles of goods and the ongoing impact of tariffs, which are adversely affecting investment and trade.
The projected economic growth for the United States is concerning, with GDP expected to fall to 1.8% in 2025 and 1.5% in 2026. In the euro area, growth is anticipated to be 1.2% in 2025 and 1.0% in 2026. Meanwhile, China’s economic expansion is forecasted to ease to 4.9% in 2025 and 4.4% in 2026.
Inflation Trends and Economic Resilience
Despite the anticipated slowdown, inflation is projected to decline across most G20 economies as economic growth moderates and labor market pressures ease. Headline inflation is expected to decrease from 3.4% in 2025 to 2.9% in 2026. Core inflation in advanced G20 economies is likely to remain stable, with estimates of 2.6% in 2025 and 2.5% in 2026.
OECD Secretary-General Mathias Cormann commented on the current state of the global economy, stating, “The global economy has remained resilient, but the full effects of higher tariffs and policy uncertainty have yet to be felt. Global economic growth is projected to slow, and significant risks remain, as well as concerns about fiscal sustainability and financial stability.” He emphasized the importance of resolving trade tensions to enhance economic growth prospects.
Recommendations for Governments and Central Banks
To navigate these challenges, Cormann urged governments to engage in productive dialogue to improve international trading arrangements. He highlighted the necessity of preserving the advantages of open markets and rules-based global trade.
Central banks are advised to remain vigilant and respond promptly to any shifts that might affect price stability. Provided that inflation expectations stay anchored, monetary policy rate reductions should be pursued in economies where inflation is forecasted to fall towards central bank targets.
As budgetary pressures and public debt rise, fiscal discipline will be essential for governments aiming to maintain debt sustainability. Establishing credible medium-term adjustment paths that focus on managing and reallocating spending, as well as optimizing revenues, is crucial for stabilizing debt burdens.
OECD Chief Economist Álvaro Santos Pereira noted, “Stronger structural reform efforts will be key to durably improve living standards and realize the potential gains from new technologies such as artificial intelligence.”
In summary, while the global economy demonstrated resilience in the first half of 2025, significant challenges lie ahead. The interplay of trade policies, inflation trends, and fiscal strategies will determine the future economic landscape.
