A new report released by the Organisation for Economic Cooperation and Development on Tuesday indicates that the world economy will likely slow down in the next two years.
The OECD predicts that global GDP will slow down from 3.3 percent in 2024, to 2.9 percent in both 2025-2026. This indicates a “challenging outlook” due to the increased risks and global uncertainty.
The expected economic downturn is largely due to a number of factors, including the mounting trade barriers, tightening finance conditions, low consumer and business confidence and increasing policy uncertainty.
The OECD has warned that this headwind is reducing prospects for a long-term recovery.
The US economy is facing a steep decline due to tariff increases and instabilities of policy.
US economy is set to experience one of the steepest declines among world’s largest economies.
The economic growth rate is projected to decline from 2,8% in 2024, to 1,6% in 2020 and then to 1,55% in 2026.
The OECD describes this situation as a sudden increase in the tariff rates on imported goods and retaliation by trade partners.
The report states that the weak growth is primarily due to increased policy uncertainty, large cuts in net immigration, and significant reductions of the federal workforce.
The OECD forecast for March, which predicted a 2.2% growth in the US by 2025, has been revised downwards.
North American neighbors are expected to also slow down.
Canada and Mexico have not been spared the regional economic slowdown. Canada’s GDP growth is forecast to be only 1% by 2025 compared with 1.5% in the year 2024.
Mexico’s growth is expected to fall to just 0.4%, down from the 1.5% it was previously.
The results are a reflection of both the US economic downturn and the current global trading environment which is still a victim of protectionist policies.
China’s economy will slow despite the tariff reduction
China is expected to also see a slowdown. The country was the focus of an ongoing tariff dispute with the United States.
The country’s predicted growth rate will slow down from 5% to 4,7% by 2025, and then to 4.3% by 2026.
This analysis shows that weak demand and trade tensions will continue to affect China’s trading trajectory.
India and Indonesia are the growth leaders
India is still the top performer in the world’s big economies.
According to OECD, the Indian economy will grow 6.3% by 2025 and 6.4% by 2026.
Indonesia’s growth is forecast to remain steady at around 4,7% by 2025, and then 4.8% by 2026.
The numbers show the relative strength of emerging markets, while some advanced economies begin to crumble under pressure.
Inflation pressures persist across G20 nations
The OECD’s report also mentions inflation concerns. It predicts that the headline annual average in the group will rise to 4,2% by 2025. This is up from the previous forecast of 3.7%.
Argentina, Turkey and Russia are the countries with the highest rates of inflation amongst the G20, at 36.6% respectively.
These numbers, while still high, are not as good as the situation in Argentina or Turkey. These figures were 219.9% for 2024 and 58.5% in total.
The OECD released its latest economic outlook. It tells a tale of a world in trouble, with a slowing economy and persistent inflation. This combination imposes a cautious forecast for global growth through the middle of 2020s.
The key insight in this post OECD reduces US growth outlook and projects India as the global leader: Key insights can be updated as new information becomes available.
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