Global GDP Growth Expected to Decelerate to 3.2 Percent in 2025

(MENAFN) Global GDP growth is expected to decelerate from 3.3% in 2024 to 3.2% in 2025, and further to 2.9% in 2026, the Organization for Economic Cooperation and Development (OECD) warned in its latest Economic Outlook published Tuesday.

The OECD attributed the revised forecast to the fading effects of "front-loading" in global trade, alongside the ongoing impact of higher tariffs and persistent policy uncertainty. These factors are curbing investment and global trade activity.

Despite a weaker medium-term projection, the OECD noted that global growth in the first half of 2025 exceeded expectations, particularly in emerging-market economies. Increased industrial production and trade were driven by businesses accelerating shipments ahead of anticipated tariff hikes.

Since May, the United States has significantly increased bilateral tariffs on almost all of its trading partners. By the end of August, the OECD estimated that the effective U.S. tariff rate had surged to 19.5%, the highest level since 1933.

The report highlighted significant risks to the global outlook, including the possibility of further tariff escalations, renewed inflationary pressures, fiscal instability, and turmoil in financial markets.

For the United States, GDP growth is forecast to decline from 2.8% in 2024 to 1.8% in 2025, and 1.5% in 2026. The expected slowdown is attributed to the drag from higher tariffs and reduced immigration, despite strong investment in high-tech sectors.

In the euro area, GDP is projected to grow at a more modest 1.2% in 2025 and 1.0% in 2026. While easier credit conditions offer some support, trade friction and geopolitical risks are expected to constrain growth.

Looking ahead, the OECD stressed that structural reforms are crucial for sustainably raising living standards and fully realizing the potential of emerging technologies like artificial intelligence.

MENAFN23092025000045017169ID1110099291