16. The current projections are based on a technical assumption that energy prices evolve in line with futures markets pricing for oil and gas as of March 20. Brent oil prices and TTF natural gas prices are around 40% and 60% higher respectively in 2026 than assumed in the December 2025 OECD Economic Outlook projections, with the gap narrowing gradually as the near-term price surge unwinds. They imply higher headline inflation pressures in the near-term, but limited additional pressures in 2027 provided that inflation expectations remain well anchored. In addition, effective tariff rates on imports into the United States are assumed to remain at the level prevailing at the start of March throughout the rest of 2026-27.
17. The impact from higher energy prices will be felt differently across countries depending on whether they are net energy importers or exporters, and the overall energy intensity of domestic production. Higher energy prices will strengthen the terms‑of‑trade and income growth in net energy exporting countries, while the opposite is true for net energy importers, especially those with relatively low energy inventory levels. Over the course of 2026, the energy shock becomes an increasingly more important factor, with global growth through the year now projected to be lower than previously expected.
18. In advanced G20 economies, growth is projected to weaken in the near-term before gradually rising through 2027. In the United States, strong growth momentum in the first quarter of 2026 is expected to be offset by a slowdown in consumer spending, owing to the combination of declining purchasing power, weakening labour force growth and depleted household savings. As a result, annual GDP growth is projected to ease from 2.0% in 2026 to 1.7% in 2027. In Canada, growth is projected to soften to 1.2% in 2026, before gradually rising to 1.7% in 2027 as stronger growth in private consumption and government investment more than counteract persistent weakness in business investment growth. In both the United States and Canada, higher energy prices may encourage greater domestic energy production, notwithstanding ongoing geopolitical and policy uncertainty.
19. In the euro area, growth is anticipated to ease from 1.4% in 2025 to 0.8% in 2026, as higher energy prices weigh on activity, before increasing to 1.2% in 2027. While fiscal expansion in Germany will support growth, especially in 2027, more restrictive fiscal policy will be a headwind in Italy and France. Similarly, planned fiscal tightening and higher energy prices are anticipated to keep growth subdued in the United Kingdom, though the impact will be attenuated by lower policy interest rates next year, with GDP growth rising from 0.7% in 2026 to 1.3% in 2027. In Japan, business investment will be supported by robust corporate profits and government subsidies, and new fiscal measures will add to final demand, particularly in 2026. These positive forces will be offset by the rising cost of energy imports, with growth projected to slightly ease from 1.2% in 2025 to 0.9% in both 2026 and 2027.
20. Economic growth in the G20 emerging-market economies is projected to ease somewhat, largely due to a step down in growth in China and India. In China, growth is anticipated to ease from 5.0% in 2025 to 4.4% in 2026 and 4.3% in 2027, as government subsidies for consumers end, energy import prices move higher, adjustment in the real estate sector continues and anti-involution measures weaken investment growth. Nonetheless, these factors should be partially offset by a series of new infrastructure projects and the recent reduction in the effective tariff rate on imports to the United States. Similarly, the decline in tariffs should support growth in India, though gas rationing will disrupt some production activities and fiscal support is expected to fade, with growth easing from 7.6% in fiscal year (FY) 2025-26 to 6.1% in FY 2026-27 and 6.4% in FY 2027‑28. In Indonesia, growth is projected to remain broadly stable as recent fiscal stimulus supports private consumption growth. Monetary policy easing is expected to offer some support to growth in several emerging-market G20 economies in 2027 once inflation moderates, including Brazil, Mexico, South Africa and Türkiye.
21. Aggregate consumer price inflation for the G20 countries will be markedly higher than previously expected in 2026, mostly owing to the increase in global energy prices. Headline inflation in the G20 is now projected to rise from 3.4% in 2025 to 4.0% in 2026, before moderating to 2.7% in 2027. In the advanced G20 economies, headline inflation is projected to rise from 2.5% in 2025 to 3.5% in 2026, before falling to 1.9% in 2027, while core inflation is anticipated to remain at 2.6% in 2026 before moderating to 2.3% in 2027. In the United States, the impact of higher energy prices on inflation will more than offset the effect from the decline in effective tariff rates on imports, especially given that the initial tariff rate increases from the first half of 2025 have only been partially passed through to consumer prices. As a result, projected headline inflation for the United States in 2026 has been revised up by 1.2 percentage points in 2026, with inflation now expected to rise from 2.6% in 2025 to 4.2% in 2026 before falling to 1.6% in 2027. In the euro area and Japan, the increase in energy prices is also expected to result in stronger price pressures in the near-term, but headline inflation is still expected to move back to central bank targets in 2027.
22. In the G20 emerging-market economies, headline inflation is projected to increase from 4.1% in 2025 to 4.4% in 2026 before easing to 3.3% in 2027. In India, the fading deflationary impact of past food and energy price-reducing shocks will be exacerbated by the recent surge in global energy prices, pushing inflation up from 2.0% in FY 2025-26 to 5.1% in FY 2026-27 and 4.1% in FY 2027-28. Inflation in China is expected to rise from its current very low level as higher energy prices feed through and spare production capacity is reduced, with headline inflation projected to rise from -0.1% in 2025 to 1.3% in 2026 and 1.1% in 2027. Further disinflation in Argentina and Türkiye is expected, despite the headwinds from energy and fertiliser costs, and inflation is also anticipated to moderate in 2027 in several other emerging-market economies, including Brazil, Indonesia, Mexico and South Africa.
