Global economic growth predictions by the OECD for the year 2025 have been revised downwards to 2.9%
Global Economic Growth Forecasted to Slow Down According to OECD
The Organization for Economic Cooperation and Development (OECD) has revised its forecast for global economic growth in 2025 and 2026, predicting a slowdown due to higher trade barriers, increased trade policy uncertainty, lower business confidence, and tightening financial conditions.
According to the OECD's latest Economic Outlook, global economic growth is expected to be 2.9% in both years, marking the slowest pace since the COVID-19 pandemic. The slowdown is attributed to various factors, including trade tensions, geopolitical instability, and monetary policy tightening.
One of the key factors affecting global economic growth is the rise in trade barriers. These barriers impede international trade flows and create uncertainty for businesses, potentially reducing investments and hiring. Lower business confidence, another factor, can also lead to reduced investments and hiring.
Tighter financial conditions, meaning less availability or higher cost of credit, can affect consumption and investment decisions. This is particularly true in economies with weak productivity and subdued consumer demand, such as the UK.
The OECD's forecast for the U.S. economy reflects a significant increase in import tariffs and retaliatory measures by some trading partners, high economic policy uncertainty, a significant slowdown in net immigration, and a noticeable reduction in federal employees. As a result, U.S. economic growth is projected to be 1.6% in 2025 and 1.5% in 2026.
In contrast, India is expected to be the fastest-growing economy, with GDP growth of 6.3% in 2025 and 6.4% in 2026. China's economy is projected to grow by 4.7% in 2025 and 4.3% in 2026. The eurozone economy is expected to grow by 1% this year and 1.2% in 2026.
The OECD's revised forecast suggests that global economic growth will be the weakest since the COVID-19 pandemic. However, other institutions like the IMF project slightly higher global growth for 2025 and 2026 based on improved early economic activity and fiscal expansions. Yet, they also warn of downside risks related to trade tensions.
In response to the OECD's forecast, China increased tariffs on U.S. goods to 125%. The U.S. GDP growth was 2.8% in 2024, and the OECD's forecast for Russia's 2025 GDP growth was cut to 1%, with the forecast for 2026 revised to 0.7%.
In conclusion, the OECD's downward revision reflects cautious concerns over ongoing geopolitical tensions, trade frictions, and monetary policy tightening that collectively slow the global economic momentum in 2025–2026. The global economy is expected to face challenges in the coming years, with the potential for further slowdowns if these factors persist.
[1] OECD (2023). Economic Outlook Interim Report. Retrieved from www.oecd.org/economic-outlook
[2] IMF (2023). World Economic Outlook Update. Retrieved from www.imf.org/en/Publications/WEO
[3] OECD (2023). Economic Outlook for the United States. Retrieved from www.oecd.org/unitedstates
In light of the OECD's forecast, businesses may face challenges due to higher trade barriers, increased trade policy uncertainty, and lower business confidence, potentially leading to reduced investments and hiring. Tightening financial conditions could also negatively impact consumption and investment decisions, particularly in economies with weak productivity and subdued consumer demand.
The OECD's revised forecast for global economic growth is attributed to various factors, including trade tensions, geopolitical instability, and monetary policy tightening, which could impact the financial sector and overall business environment.
