OECD Sees Global Growth Cooling Through 2026

The IMF raised its global growth forecast to 3.3% from 3.1% this year, and warned that major risks are building. The upgrade reflects resilient activity, strong labour markets and heavy investment in new technologies, especially artificial intelligence. However, the IMF cautioned that these same forces could become sources of instability. Rapid AI-driven investment, particularly in North America and Asia, is supporting growth and equity markets, but if productivity gains fail to materialise, it could trigger sharp market corrections and weaken household wealth. Trade and geopolitical risks also remain elevated. While the impact of past tariffs is expected to fade, new disputes or a shift toward protectionism could hurt corporate profits and keep inflation pressures alive. Regionally, the fund expects solid growth in the US (2.6% in 2026), modest expansion in the Euro Area (1.3%), and stronger momentum in China (4.5%), underscoring an uneven but still resilient global outlook.

The OECD expects global growth to ease from 3.2% in 2025 to 2.9% in 2026 before a slight rebound to 3.1% in 2027, as tariffs, weak trade and geopolitical uncertainty weigh on activity. In the US, growth is projected to slow to 2.0% in 2025 and 1.7% in 2026, before edging up to 1.9% in 2027 amid softer job gains and fiscal tightening. China is forecast to expand 5% this year, weakening to around 4.4%–4.3% in 2026–27 as consumption remains subdued and real estate continues to contract. The Euro Area is expected to grow modestly at around 1.3% in 2025, easing to 1.2% in 2026 and rising to 1.4% in 2027 as domestic demand gradually improves, while UK growth is seen slowing from 1.4% in 2025 to 1.2% in 2026, before a slight pickup to 1.3% in 2027 due in part to budget tightening. Japan is projected to expand 1.3% in 2025, before slowing to 0.9% per annum in 2026-27 amid weaker external demand.

World Trade Organization chief Ngozi Okonjo-Iweala urged the U.S. and China to de-escalate trade tensions, warning that a decoupling between the world’s two largest economies could cut global economic output by 7% in the long term. Speaking to Reuters, she said the WTO is “extremely concerned” about the renewed spike in tensions and has engaged with both sides to encourage dialogue. “We’re obviously worried at any escalation of U.S.-China tensions,” she said, expressing hope that both nations would again step back from further tariff actions as they did earlier this year. Okonjo-Iweala emphasized that U.S.-China cooperation is vital not only for their economies but for global stability. The WTO recently cut its 2026 forecast for global trade growth to 0.5% from 1.8%, citing delayed effects from U.S. tariffs, while raising its 2025 forecast to 2.4%.