OECD Lowers Global Growth Forecasts for 2026

The OECD lowered its global growth forecasts for this year to 2.8% from 3.4%, while keeping the projection for 2027 steady at 3.1%. The agency noted that the duration and extent of the conflict in the Middle East remain uncertain, but the economic effects are likely to be felt for some time given the months it will take to restore damaged infrastructure and transport routes and deliver products around the world. Growth is set to slow modestly in North America and Europe before a tentative recovery, with the US easing to 2% in 2026 and 1.8% in 2027, Canada dipping to 1.2% before rebounding to 1.7%, Mexico strengthening to 1.9% by 2027, the UK from 0.9% to 1.1%, while China moderates steadily to 4.5% in 2026 and 4.3% in 2027. In addition, the OECD noted that higher energy prices, supply shortages, tighter financial conditions and weaker confidence would weigh on activity worldwide. Inflation would also intensify, rising by around 0.4 pp in 2026 and 1.3 pp in 2027.

The IMF has revised its 2026 global growth forecast downward to 3.1%, a 0.2 percentage-point cut from previous expectations, while maintaining the 2027 outlook at 3.2%, reflecting the economic fallout from the ongoing Middle East conflict. Although the baseline scenario assumes a contained conflict, the IMF warns that prolonged hostilities could further weaken the global economy and destabilize financial markets. It also noted that energy supply shock from the Iran conflict is comparable in severity to the 1974 oil crisis, though the global economy is now more resilient. By region, the US economy is expected to grow by 2.3% in 2026 and 2.1% in 2027. China’s growth is forecast to slow to 4.4% and 4.0%, respectively. The Euro Area is projected to expand by just 1.1% in 2026 and 1.2% in 2027, while the UK and Japan face similarly modest growth of 0.8% and 0.7% in 2026, compared to 1.3% and 0.6% in 2027. Global inflation is expected to rise modestly in 2026 before declining again in 2027.

Global GDP growth is expected to hold at 2.9% in 2026 before rising slightly to 3.0% in 2027, driven by strong tech investment and easing tariffs, according to the latest OECD Economic Outlook. However, the ongoing Middle East conflict continues to weigh on growth and introduce uncertainty, with projections assuming a temporary energy market disruption and price relief from mid-2026. Inflation forecasts were revised upward, with G20 advanced economies facing 4.0% headline inflation in 2026, 1.2 percentage points higher than previously anticipated, before moderating to 2.7% in 2027. Core inflation is projected to decline from 2.6% to 2.3% over the same period. By region, US growth is set to slow from 2.0% in 2026 to 1.7% in 2027, with inflation peaking at 4.2% this year. China’s growth is expected to ease to 4.4% in 2026 and 4.3% in 2027, while the Eurozone faces a sluggish 0.8% in 2026 before recovering to 1.2% in 2027. Japan’s growth remains modest at 0.9% for both years.