Amidst a rapidly evolving global economic landscape, recent insights from the Organisation for Economic Co-operation and Development (OECD) reveal a surprisingly resilient growth trajectory, fueled largely by an investment boom in artificial intelligence. While the implications of US tariff increases loom, particularly for trade dynamics, this period of growth underscores meaningful shifts in market behavior and technological adaptation that could shape future economic stability.
Global growth continues to exhibit resilience, with an investment boom in artificial intelligence (AI) playing a crucial role in offsetting the shocks caused by recent tariff increases imposed by the United States, according to the Organisation for Economic Co-operation and Development (OECD). The Paris-based organization, in a statement released on Tuesday, outlined its perspective on the global economy while cautioning that growth remains vulnerable to potential trade tensions that could emerge.
In its latest Economic Outlook, the OECD projected a modest slowdown in global growth, forecasting a decrease from 3.2 percent in 2025 to 2.9 percent in 2026. Importantly, the OECD maintained its earlier estimates from September, suggesting a subsequent rebound to 3.1 percent in 2027. OECD Secretary-General Mathias Cormann indicated that the shocks triggered by tariff hikes under US President Donald Trump have, so far, been relatively mild. However, he emphasized that the costs associated with these tariffs are expected to rise as companies deplete the inventories they built up in anticipation of increased expenses.
The OECD revised its forecast for the US economy, which is now expected to grow by 2 percent in 2025, a slight increase from the earlier estimate of 1.8 percent. This projection will likely witness a slowdown to 1.7 percent in 2026, where expectations were previously set at 1.5 percent. Enhanced AI investment, fiscal support measures, and anticipated rate cuts by the US Federal Reserve have contributed positively to this outlook, mitigating the adverse effects of tariffs on imports, workforce reductions, and reduced immigration.
Despite these positive developments, the OECD raised concerns regarding the trajectory of US fiscal policy, labeling it as unsustainable. The organization warned that substantial budget deficits and increasing levels of national debt indicate that significant adjustments will be necessary in the coming years for a more balanced fiscal future.
Examined through a broader lens, the growth outlook for other leading economies presents a nuanced picture. For instance, China is projected to maintain a steady growth rate of 5 percent in 2025, rebounding from an earlier forecast of 4.9 percent. However, growth is expected to slow to 4.4 percent in 2026 as fiscal support dwindles and the repercussions of US tariffs on Chinese exports unfold.
In the eurozone, growth prospects have been adjusted to reflect a slightly improved outlook of 1.3 percent for 2025, owing largely to resilient labor markets and increased public expenditure in Germany. Conversely, as budget-tightening measures in countries like France and Italy become more pronounced, growth is expected to moderate to 1.2 percent in 2026.
Japan’s economy also exhibits favorable growth estimates, projected to expand by 1.3 percent in 2025 primarily due to strong corporate performance before easing to 0.9 percent in 2026.
On the trade front, global growth is anticipated to cool from 4.2 percent in 2025 to 2.3 percent in the following year, as the cumulative effects of tariffs continue to strain investment and consumer expenditure. Increased uncertainty regarding trade policies may further constrain the recovery efforts.
Finally, inflation rates across major economies are predicted to gradually align with central bank targets by mid-2027, with the United States expected to see inflation peak in mid-2026. As central banks work to alleviate inflationary pressures, the US Federal Reserve is projected to implement slight rate cuts by the end of 2026, assuming no unexpected inflationary surprises arise from tariffs.
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