Stronger than expected resilience
The Organisation for Economic Co-operation and Development (OECD) raised its global economic growth forecast for 2025 to 3.2 percent, up from 2.9 percent in June. While this marks a slowdown from the 3.3 percent growth recorded in 2024, the revision reflects stronger-than-expected resilience in several major economies, particularly among emerging markets such as Brazil, Indonesia and India.
Growth in the United States is now projected at 1.8 percent for 2025, slightly higher than June’s 1.6 percent forecast but still well below the 2.8 percent growth achieved in 2024. For 2026, the OECD left its U.S. forecast unchanged at 1.5 percent. The global forecast for 2026 remains at 2.9 percent.
Drivers of growth
The OECD report highlighted three major factors behind the stronger performance: front-loading of industrial production and trade ahead of U.S. tariffs, robust investment tied to artificial intelligence in the United States, and fiscal stimulus in China offsetting property sector weaknesses. According to chief economist Alvaro Pereira, most G20 forecasts remain largely unchanged, but front-loaded activity earlier this year gave the global economy a temporary boost.
Tariff concerns loom large
Despite the upgrade, the OECD warned of risks tied to escalating trade barriers. Sweeping U.S. duties of up to 50 percent on imports came into effect in August, pushing the average effective U.S. tariff rate to 19.5 percent — the highest level since 1933. The OECD noted that the full impact has not yet filtered through, as companies initially absorbed some of the costs, but signs are now emerging in consumer prices, employment and spending patterns.
“The tariff shock is bringing more inflationary pressures in many countries,” Pereira said. Labour markets are already showing softness, with fewer job openings and higher unemployment in some economies.
Inflation and future risks
The OECD lowered its 2025 headline inflation forecast for G20 countries to 3.4 percent, slightly below the 3.6 percent projected in June. U.S. inflation is now expected to come in at 2.7 percent, down from 3.2 percent previously forecast. Still, the organization cautioned that additional tariff hikes or renewed price pressures could reverse disinflation progress.
The report also pointed to high fiscal risks, potential financial market repricing, and volatile crypto-asset valuations as key vulnerabilities. On the upside, faster adoption of AI and a reduction in trade restrictions could improve growth prospects.
