Economic Outlook by the OECD

By Leigh Thomas
PARIS (Reuters) – The world economy is set for steady growth in the next two years if resurgent protectionism does not derail a recovery in global trade, the Organisation for Economic Cooperation and Development (OECD) stated on Wednesday.

The world economy is poised to grow 3.2% this year and 3.3% in 2025 and 2026 as lower inflation, job growth, and interest rate cuts help offset fiscal tightening in some countries, according to the OECD's latest Economic Outlook.

These forecasts were largely consistent with its previous review from September, where growth expectations were similarly set at 3.2% for this and next year, without a forecast for 2026.

After global trade declined last year, it is rebounding, with growth in volumes expected to reach 3.6% next year despite increasing restrictions on imports. The OECD commented, "Rising trade tensions and further moves towards protectionism might disrupt supply chains, raise consumer prices, and negatively impact growth."

The outlook for global trade has been complicated since U.S. President-elect Donald Trump intensified calls for tariff increases on numerous major trade partners.

As a cooling job market leads to moderated consumer spending, the OECD projects that U.S. growth will decrease from 2.8% this year to 2.4% in 2025 and 2.1% in 2026.

In China, the world's second-largest economy, growth is anticipated to slow from 4.9% in 2024 to 4.7% in 2025 and 4.4% in 2026, despite monetary and fiscal easing, due to sluggish consumer spending stemming from high savings.

In the eurozone, investments are expected to benefit from central bank easing, with tight labor markets supporting consumer spending, leading to growth rising from 0.8% this year to 1.3% in 2025 and 1.5% in 2026.

UK growth is projected to increase from 0.9% this year to 1.7% in 2025, attributed to real income gains and an increase in public spending, despite a rise in taxes before tapering to 1.3% in 2026.

Thanks to economic stimulus measures, Japan is predicted to recover from a 0.3% contraction this year to 1.5% growth in 2025, then moderating to 0.6% in 2026.

As inflation eases, most major central banks are expected to continue cautiously loosening monetary policy, with the exception of Japan, the OECD reported.

With public finances under strain for most governments, the OECD emphasized the need for decisive action to stabilize debt burdens.