Investment is “instrumental to revive our economies,” asserts the Organization for Economic Co-operation and Development (OECD) in its latest outlook report, which otherwise paints a grim picture of global economic growth amidst ongoing trade war headwinds. The OECD has significantly lowered its global growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, a notable reduction from its previous 3.1% forecast.
The report directly attributes this downgraded outlook to the “challenging and uncertain environment” created by current trade policies, particularly the use of tariffs. The OECD warns that “lower growth and less trade will hit incomes and slow job growth” across nearly all nations. The United States, Canada, Mexico, and China are specifically identified as major contributors to this anticipated global economic deceleration.
Beyond stunted growth, the OECD also highlights the inflationary pressures stemming from protectionism. The report suggests that tariffs will lead to increased costs for goods and services, ultimately burdening consumers. This inflationary risk is particularly acute for developing nations, many of which are already grappling with substantial debt and face significant refinancing needs in the near future.
To navigate these challenges, the OECD recommends that central banks remain vigilant against inflation. More broadly, the report emphasizes the critical role of boosting investment to stimulate economic activity and strengthen public finances. It acknowledges that governments with high debt levels may find it more difficult to finance these crucial projects, underscoring the urgent need for sustainable debt management and collaborative efforts to foster growth.