The global economy faces a gradual slowdown over the next two years, according to the Organization for Economic Cooperation and Development (OECD), which revised its GDP growth projections to 3.2% for 2025 and 2.9% for 2026. The forecast, released Tuesday, highlights mounting pressures from trade tensions and policy uncertainty as key drivers of the deceleration.
While industrial production and trade showed unexpected resilience in early 2025—particularly in emerging markets—the OECD warns that front-loading ahead of tariff hikes has created a "sugar rush" effect. The U.S. effective tariff rate surged to 19.5% in August, its highest level since the Great Depression, with ripple effects yet to fully materialize across supply chains.
Regional disparities emerge in the outlook: U.S. growth is expected to drop to 1.8% in 2025 amid reduced immigration and trade headwinds, while the eurozone struggles to maintain 1% growth by 2026 despite easing credit conditions. The report flags escalating tariffs, fiscal strains, and financial instability as critical risks.
OECD analysts stress that structural reforms and strategic investments in technologies like AI will be vital to sustain long-term growth. "The window to harness innovation for productivity gains is narrowing," the report notes, urging policymakers to balance short-term challenges with forward-looking strategies.
