The organization has warned that President Donald Trump has put US fiscal policy on an unsustainable path.
According to the Organization for Economic Co-operation and Development (OECD), global growth is going better than expected as a surge in artificial intelligence (AI) investment helps offset some of the shock from the United States’ tariff hike.
However, the Paris-based organization warned on Tuesday that global growth is vulnerable to any new outbreak of trade tensions, while investor optimism about AI could lead to a stock market correction if it does not meet expectations.
Recommended Stories
4 item listend of list
In its Economic Outlook, the OECD forecast global growth would slow slightly from 3.2 percent in 2025 to 2.9 percent in 2026, keeping its forecast unchanged from its last estimate in September. It predicted a rebound to 3.1 percent in 2027.
OECD chief Mathias Cormann said trade shocks from U.S. President Donald Trump’s tariff hikes have proven relatively mild so far, but he said their costs were likely to rise.
“The full impact of those higher tariffs will become apparent by the beginning of the year as companies reduce the inventories they have built up,” he said at a news conference.
The US economy is projected to grow 2 percent in 2025, revised up from 1.8 percent predicted in September, before slowing to 1.7 percent in 2026, up from 1.5 percent predicted in September.
AI investments, fiscal support and an expected US Federal Reserve rate cut are helping to offset pressures from tariffs on imported goods, lower immigration and federal job cuts, the OECD said.
However, it warned that the Trump administration has put US fiscal policy on an unsustainable trajectory with a large budget deficit and rising debt that will require “significant adjustments” in the coming years.
Global trade growth will remain slow
China’s growth is expected to hold steady at 5 percent in 2025, down from 4.9 percent in September, before slowing to 4.4 percent in 2026 – unchanged from September – as fiscal support is reduced and new US tariffs on goods imported from China increase.
The eurozone’s 2025 growth forecast was revised down to 1.3 percent from 1.2 percent, supported by flexible labor markets and increased public spending in Germany. Growth is expected to decline to 1.2 percent in 2026 – previously seen at 1 percent – as budget tightening in France and Italy weighs on prospects.
Japan’s economy is forecast to grow 1.3 percent in 2025, up from 1.1 percent, before slowing to 0.9 percent in 2026, boosted by strong corporate earnings and investment.
Global trade growth is expected to slow from 4.2 percent in 2025 to 2.3 percent in 2026 as the full impact of tariffs falls on investment and consumption. Increased trade policy uncertainty limits prospects for a recovery.
Inflation in most major economies is projected to gradually return to the central bank’s target by mid-2027. In the US, inflation is expected to peak in mid-2026 due to the first pass-through of tariff easing. In China and some emerging markets, inflation is projected to rise modestly due to declines in spare production capacity.
Most major central banks are expected to maintain or reduce borrowing costs in the coming year as inflation pressures ease. Barring inflation surprises from tariffs, the US Federal Reserve is projected to cut rates little through the end of 2026.
<a href