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The global economy has demonstrated greater resilience than anticipated this year, buoyed by supportive monetary policies and surging investments in artificial intelligence, but underlying vulnerabilities persist, according to the latest OECD Economic Outlook. Released on Monday, the report projects worldwide GDP growth to moderate to 3.2 per cent in 2025, down from 3.3 per cent in 2024, before easing further to 2.9 per cent in 2026 and rebounding slightly to 3.1 per cent in 2027. While AI-driven trade and innovation have cushioned the blow from escalating trade barriers, the organisation warns of heightened risks from fiscal strains and geopolitical tensions.
The Paris-based body raised its forecasts for the United States and euro area for both this year and next, citing robust consumer spending and easing inflation. US growth is now expected at 2.6 per cent in 2025, up from 2.4 per cent previously, while the euro zone’s is seen at 1.4 per cent. However, these upward revisions are tempered by concerns over long-term bond yields and the potential for renewed inflationary pressures from tariffs, particularly under the incoming Trump administration.
OECD chief economist Clare Lombardelli emphasised the need for vigilance. “The global economy is proving more resilient than expected, but fragilities remain,” she said. “With inflation moderating and expectations anchored, gradual policy rate reductions can continue in many economies, but those facing tariff-driven price pressures may need to proceed more cautiously.”
Key Projections and Risks
The report attributes much of the resilience to AI-enabling investments, which have spurred demand in semiconductors and data infrastructure, offsetting headwinds from policy uncertainty and rising trade restrictions. Emerging markets, particularly in Asia, are forecast to drive much of the growth, though downgrades for regions like Latin America reflect spillover effects from US tariffs.
Inflation is projected to fall to 4.2 per cent globally in 2025, allowing central banks room to ease, but stretched financial market valuations—including a rapid expansion in crypto-assets—and growing interconnections between banks and non-banks pose stability risks. The OECD calls for enhanced supervision and timely regulatory reforms to curb arbitrage.
Downside scenarios include further trade fragmentation, which could shave 0.5 percentage points off global growth, or fiscal tightening in response to rising debt burdens. On the upside, faster AI adoption could add 0.3 points if productivity gains materialise sooner.
Policy Recommendations
Policymakers should prioritise structural reforms to boost productivity, such as skills training for the AI era and green infrastructure spending. The report urges a coordinated international approach to trade disputes, warning that unilateral actions could exacerbate supply chain disruptions.
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Reactions have been measured. US Treasury officials welcomed the upgraded forecasts but stressed the need for domestic investment incentives. In Europe, German Economy Minister Robert Habeck highlighted the outlook’s emphasis on multilateralism amid transatlantic frictions.
As December’s economic calendars fill with central bank decisions—including the Federal Reserve’s anticipated rate cut this week—the OECD’s analysis serves as a timely reminder of the delicate balance between innovation and instability. For businesses and governments, the message is clear: Resilience today does not guarantee stability tomorrow.
