Projected global economy growth for the year 2025 revised downward by OECD to 2.9%
Global Economic Growth Forecast Revised Downward by OECD
The Organization for Economic Co-operation and Development (OECD) has revised downwards its global economic growth forecast for 2025 from 3.3% to 3.1%, and anticipates a further slowdown in 2026. This slowdown is largely due to trade barriers, geopolitical tensions, and declining investor confidence.
The OECD Chief Economist, Álvaro Pereira, warned that the slowdown in economic prospects will be felt worldwide. One of the key contributors to this slowdown is the reintroduction or escalation of tariffs, particularly those associated with former U.S. President Donald Trump’s trade policies, which threaten to disrupt global supply chains, raise consumer prices, and reduce living standards globally.
In North America, the OECD warns that reinstating or increasing tariffs, such as a 25% duty on Canadian and Mexican imports or a 10% tariff on all U.S. imports, could significantly reduce growth. As a result, U.S. GDP growth is projected to slow from 2.5% to 1.6% by 2026.
The increased economic policy uncertainty is dampening investment and export activities, notably in the euro area, which saw downward revisions of 2 percentage points for both 2025 and 2026 growth forecasts. The UK and France similarly show cautious outlooks reflecting these uncertainties.
Slower industrial and export activity is also a concern, with China’s industrial output growth moderating, signaling slower expansion among key emerging economies. However, India remains relatively robust.
Labor market signs of slowing growth are also evident across OECD countries, with growth in employment decelerating. This may further reflect and contribute to weakening economic momentum amid geopolitical and trade-related uncertainties.
The OECD has cut its forecast for Russia's 2025 GDP growth to 1%, and for 2026 to 0.7%. The forecast for U.S. economic growth reflects a significant increase in import tariffs and retaliatory measures by some U.S. trading partners, as well as high economic policy uncertainty, a significant slowdown in net immigration, and a notable reduction in federal employment.
China's economy is forecast 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. India's GDP is expected to grow by 6.3% in 2025 and 6.4% in 2026.
The OECD noted that global economic growth will be the weakest since the COVID-19 pandemic. In response to the tariffs imposed by Donald Trump in April 2020, China raised tariffs on U.S. goods to 125%. However, Washington and Beijing agreed to a mutual reduction in tariffs for 90 days in May 2020.
Slower growth and reduced trade will affect incomes and slow job creation, according to the OECD Chief Economist. The OECD has linked the revision of forecasts to the strengthening of trade barriers and increased political uncertainty.
Finance and business sectors could be negatively impacted by the slowdown in global economic growth, as the OECD has revised downwards its forecast for 2025 due to increased tariffs and trade barriers, which could affect investor confidence and financial markets worldwide.
The reintroduction or escalation of tariffs, such as the 25% duty on Canadian and Mexican imports, could potentially harm business operations and profitability in North America, contributing to the overall slowdown in economic growth as forecasted by the OECD.
