Global economic growth is expected to decelerate over the next two years, with global GDP projected to slow from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026. Rising tariffs and ongoing policy uncertainty are key factors slowing investment and trade, as per the the latest OECD Interim Economic Outlook
In the United States, GDP growth is forecast to fall sharply from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026. The slowdown is driven by higher tariff rates, moderating net immigration, and reductions in the federal government workforce.
China’s growth is also expected to decelerate, from 4.9% in 2025 to 4.4% in 2026, as front-loaded economic measures unwind, tariffs take effect, and fiscal support diminishes. The euro area is projected to experience a smaller but steady slowdown, from 1.2% in 2025 to 1.0% in 2026, with trade frictions and geopolitical uncertainty partially offset by stronger public investment and easier credit conditions.
Inflation Trends
Headline inflation in most G20 economies is expected to ease from 3.4% in 2025 to 2.9% in 2026, reflecting softer economic growth and labour market conditions. Core inflation in advanced G20 economies remains broadly stable, declining slightly from 2.6% to 2.5%.
Despite this easing, inflationary pressures could resurface. Disinflation has slowed in some economies, with goods prices creeping higher and services inflation remaining persistent.
Trade and Tariff Impacts
The effects of higher tariffs are still unfolding. Many tariff measures are being introduced gradually, with firms initially absorbing some costs through margins. However, the impact on prices and trade is becoming increasingly visible.
Policy Recommendations
Promote Transparency in Trade Policy
Countries should cooperate to ease trade tensions, lower trade barriers, and address economic security concerns, fostering a more predictable global trading environment.
Maintain Vigilance in Monetary Policy
Central banks need to respond promptly to shifting inflation risks. Where inflation expectations remain anchored and underlying inflation trends toward targets, gradual policy rate reductions may continue. Preserving central bank independence ensures credibility and limits volatility.
Safeguard Fiscal Sustainability
Fiscal discipline is essential to maintain long-term public debt sustainability and preserve capacity to respond to shocks. Medium-term adjustment paths combining spending containment and revenue enhancement are critical to stabilizing debt burdens.
Accelerate Structural Reforms and Technology Adoption
Structural reforms that address competition, barriers to entry, and skills development are needed to boost living standards. Policymakers should also focus on harnessing potential gains from new technologies, including artificial intelligence, to support long-term growth.
