The world economy has shown resilience this year, yet significant weaknesses continue to weigh on the outlook, according to the Organisation for Economic Co operation and Development’s latest assessment.
The OECD expects global growth to ease from 3.2% in 2025 to 2.9% in 2026 before rising to 3.1% in 2027. Growth in the United States is forecast to slow from 2.0% in 2025 to 1.7% in 2026, followed by 1.9% in 2027. The euro area is projected to grow by 1.3% in 2025, 1.2% in 2026 and 1.4% in 2027. China’s expansion is set to ease from 5.0% in 2025 to 4.4% in 2026 and 4.3% in 2027.
The OECD expects annual headline inflation across the G20 to decline to 2.9% in 2026 and 2.5% in 2027, down from 3.4% this year. By mid 2027, inflation is forecast to return to target in most major economies.
Mathias Cormann, Secretary General of the OECD, said countries need to strengthen dialogue to resolve trade tensions and reduce policy uncertainty. He added that fiscal discipline is needed as governments face rising debt pressures and growing demands from defense commitments and ageing populations. He also called for structural reforms that cut red tape, simplify regulation and lower barriers within service sectors in order to support innovation, competition and higher living standards.
The report notes that supportive macroeconomic policies and improved financial conditions have helped offset the effects of uncertainty and increased trade restrictions. Optimism about new technologies and investment in artificial intelligence has also buoyed demand.
However, the OECD said the full impact of recent tariff increases is still unfolding and is already visible in consumer prices, business costs and spending patterns, particularly in the United States. Global trade growth weakened in the second quarter. There are also early indications of softer labour demand, with job openings falling back to 2019 levels.
The outlook identifies several risks including further trade barriers, weaker than expected economic performance, lower than expected returns from investment in artificial intelligence and renewed inflation pressures. Any of these could prompt sharper adjustments in financial markets where asset prices remain stretched.
The OECD said central banks should stay alert to shifts that threaten price stability and adjust policy rates when necessary. It added that if inflation expectations remain stable, interest rate cuts should continue where inflation is forecast to decline or stay contained.
The organisation also warned that volatility in crypto assets and closer links between non-bank financial institutions and the traditional banking system pose additional risks to financial stability.
The report stresses the need for prudent fiscal management to keep debt sustainable and preserve governments’ ability to respond to future shocks. It says spending restraint, more efficient public services and better targeted tax and spending decisions will be essential. Support should remain focused on those most in need while prioritising measures that strengthen long-term growth.
