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As American businesses prepare for a new presidential administration and the potential for new tariffs on imported goods, the Organization for Economic Cooperation and Development (OECD) is anticipating a largely positive outlook for the world economy for 2025 and beyond. In its latest Economic Outlook, the OECD says global growth will remain resilient in 2025 and 2026 despite the forces that are working against it.
The OECD expects global gross domestic product (GDP) growth of 3.3% in 2025 (up from 3.2% in 2024), and 3.3% in 2026. It says the projections vary significantly across regions. For example:
- GDP growth in the U.S. is projected to be2.8% in 2025, before slowing to 2.4% in 2026.
- In the Euro area GDP growth is projected at 1.3% in 2025 and 1.5% in 2026.
- Growth in Japan is projected to expand by 1.5% in 2025 but then decline to 0.6% in 2026.
- China is expected to continue to slow, with GDP growth of 4.7% in 2025 and 4.4% in 2026.
“The global economy has proved resilient. Inflation has declined further towards central bank targets, while growth has remained stable,” says OECD Secretary-General Mathias Cormann, in a press release. “Significant challenges remain. Geopolitical tensions pose short-term risks, public debt ratios are high and medium-term growth prospects are too weak.”
Cormann discusses the need for policies that “safeguard macroeconomic stability,” using measures like monetary policy easing that’s carefully calibrated to ensure inflationary pressures are durably contained. “To boost productivity and the foundations for growth,” Cormann adds, “we must enhance education and skills development efforts, undo overly stringent constraints to business investment and successfully tackle the structural increase in labor shortages.”
Persistent Uncertainty Remains
The OECD’s Economic Outlook highlights persistent uncertainty, and says an intensification of the ongoing conflicts in the Middle East could disrupt energy markets and hit confidence and growth. Rising trade tensions could also hamper trade growth, it adds. “Adverse surprises related to growth prospects, or the path of disinflation could trigger disruptive corrections in financial markets,” the OECD points out.
The Wall Street Journal points out that the OECD’s forecasts assume no changes in trade policies, and that appears unlikely given that the incoming president has said he’ll impose higher tariffs on imports from a wide range of countries. “Growth continues to be resilient,” Alvaro Pereira, the OECD’s chief economist, told WSJ. “We see U.S. growth being very robust.”
Pereira warned about increasing risks to the growth outlook from trade tensions and protectionism, with higher tariffs likely to weaken growth and push consumer prices higher.
“Another threat to the recovery from the Covid-19 pandemic,” the WSJ says, “and the inflation surge is wide budget deficits in a number of countries, including the U.S. and France.”
A Second Opinion
Goldman Sachs Research is also forecasting another solid year of global economic growth in 2025. “Our economists project the U.S. will outperform expectations while the euro area lags behind amid fresh tariffs that are anticipated from the Trump administration,” the firm points out.
Goldman Sachs says worldwide GDP will expand by 2.7% next year on an annual average basis, matching the estimated growth in 2024. U.S. GDP is projected to increase 2.5% in 2025, well ahead of the consensus at 1.9%. The euro area economy is expected to expand 0.8%, compared to the consensus of 1.2%.
“Global labor markets have rebalanced,” Goldman Sachs Research Chief Economist Jan Hatzius writes in Macro Outlook 2025: Tailwinds (Probably) Trump Tariffs. “Inflation has continued to trend down and is now within striking
distance of central bank targets. And most central banks are well into the process of cutting interest rates back to more normal levels.”
