The Organisation for Economic Co-operation and Development (OECD) has revised its global growth outlook upward for 2025, citing short-term resilience in advanced economies, while warning that rising trade barriers and tightening financial conditions are likely to drag on global momentum in the years ahead. In its September 2025 Interim Economic Outlook, the OECD raised its global gross domestic product (GDP) forecast for 2025 to 3.2 percent, up from 2.9 percent in its June estimate.
For 2026, global growth is projected to moderate to 2.9 percent, underscoring expectations of a broader slowdown. The outlook highlights diverging trends between short-term stabilization and growing structural risks, particularly in the United States and other advanced economies. The U.S. economy, which expanded by 2.8 percent in 2024, is now expected to grow by just 1.8 percent in 2025 and 1.5 percent in 2026. Although the OECD lifted its U.S. forecast slightly from its previous projection, it emphasized that the deceleration reflects waning consumer demand, high interest rates, and the cumulative impact of trade protectionism.
The report pointed to a sharp increase in the effective tariff rate on U.S. goods imports, which reached 19.5 percent by August 2025, the highest level since 1933. These tariffs, introduced under policies aligned with President Donald Trump’s trade agenda, have begun to weigh on import volumes and are expected to erode investment and productivity growth. While many firms temporarily absorbed the impact by compressing profit margins or building inventories ahead of tariff enforcement, the OECD cautioned that the full economic burden is yet to be felt.
China’s 2025 growth forecast was revised slightly higher, supported by recent fiscal and monetary easing. However, its export momentum has declined following a surge in early 2025 driven by frontloaded shipments before U.S. trade restrictions took effect. The report noted continued weakness in China’s property sector, subdued consumer confidence, and challenges in sustaining private investment despite government stimulus efforts.
India remains fastest growing major economy in OECD outlook
India, the world’s third-largest economy by purchasing power parity, was not included in the September update. However, in its comprehensive 2025 Economic Outlook published earlier this year, the OECD projected India’s real GDP growth at 6.3 percent for the 2025–26 fiscal year and 6.4 percent for 2026–27. India remains the fastest-growing major economy, driven by robust domestic demand and infrastructure investment.
In the euro area, growth is expected to remain modest, with a recovery in Germany offset by fiscal tightening and political uncertainty in France and Italy. The OECD noted moderate improvements in Japan, supported by domestic consumption, although external demand remains weak and export prospects are fragile. UK’s forecast was raised to 1.4 percent growth in 2025, reflecting improved consumer sentiment, slowing inflation, and a gradual rebound in business investment.
Global inflation pressures continue to ease unevenly
Inflation across advanced economies is gradually easing but remains above central bank targets in many jurisdictions. In the United States, the OECD cited persistent inflation in services and housing, along with continuing wage pressures. While some monetary authorities may consider adjusting interest rates in response to slowing growth, the report did not anticipate significant policy shifts in the near term, stressing the need for data-driven decision making.
The OECD underlined multiple risks to the global economy, including elevated trade tensions, volatile energy markets, and tighter financial conditions. It warned that a resurgence of protectionist policies, such as those currently implemented in the U.S., could further distort global supply chains and hinder long-term growth prospects. The report arrives ahead of key meetings of the International Monetary Fund (IMF) and World Bank, where global coordination on trade and inflation is expected to dominate discussions. – By Content Syndication Services.