The global economy has been resilient this year, despite concerns about a sharper slowdown in the wake of higher trade barriers and significant policy uncertainty. Activity has held up thanks to front-loading of production and trade, strong AI-related investment, and supportive fiscal and monetary policies.
Yet, global trade growth moderated in the second quarter of this year, and we expect higher tariffs to gradually feed through to higher prices, reducing growth in household consumption and business investment. Labour markets are still relatively tight, but are showing signs of easing, as job openings have fallen back to their pre-pandemic levels of 2019.
Our projections point to a moderation of global GDP growth, from 3.3% in 2024, to 3.2% in 2025 and 2.9% in 2026, followed by a small rebound to 3.1% in 2027. Inflation is expected to gradually return to target in most major economies by mid-2027.
This outlook remains fragile. A further rise in trade barriers, especially around critical inputs, could inflict significant damage on supply chains and global output. High asset valuations based on optimistic expectations of AI-driven corporate earnings pose a risk of potentially abrupt price corrections. Fiscal vulnerabilities may push long-term sovereign yields higher, tightening financial conditions and hampering growth.
Constructive dialogue between countries is central to ensure a lasting resolution to trade tensions and improve the economic outlook. All other things being equal, well-functioning open global markets mean better living standards and stronger growth. Governments should engage productively with one another to make international trading arrangements fairer and function better, in a way that preserves the economic benefits of open markets and rules-based global trade.
Central banks should remain vigilant, continuing to lower rates where inflation is firmly at or returning to targets, yet be ready to adjust course in case of renewed inflationary pressures or unexpected labour market weakness. Financial regulators must ensure effective oversight of non-bank financial institutions and crypto assets, to ensure financial innovation does not lead to undue financial stability risks.
Fiscal discipline is necessary to tackle high and rising public debt, and maintain fiscal space to react to shocks. Systematic and regular spending reviews, strengthened public procurement practices, greater digital technology adoption in government, and better targeting of social benefits would improve efficiency of public spending and free up spending for areas that better support opportunities and growth.
Ambitious structural reforms are important to unlock stronger prospects for economic growth. Current potential GDP per capita growth in the OECD is estimated at 1.4%, down from around 2.2% in the late 1990s. Policy reforms that reduce red tape, simplify regulations and lower entry barriers in service sectors are key for enhancing competition, innovation, productivity and business dynamism.
This OECD Economic Outlook projects a relatively mild negative impact of recent trade shocks and elevated uncertainty on the global economy. Policymakers need to tackle underlying fragilities, advance structural reforms and optimise public finances, in order to durably strengthen growth prospects and living standards.
2 December 2025
Mathias Cormann
OECD Secretary-General