The global economy stands at a precipice, and the Organization for Economic Co-operation and Development (OECD) is urging governments to actively foster growth to avert a deeper downturn. The OECD has significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, signaling a critical moment for international economic policy.
The OECD’s latest outlook report states unequivocally that “weakened economic prospects will be felt around the world, with almost no exception.” It predicts that “lower growth and less trade will hit incomes and slow job growth,” signaling a broad negative impact on livelihoods globally. The United States, Canada, Mexico, and China are specifically identified as major contributors to this anticipated global economic decline.
Adding to the concerns, the OECD warns that “protectionism” will lead to increased inflation, causing costs for goods and services to rise. This inflationary pressure, combined with already high debt levels, poses a severe risk for developing nations, which may struggle with refinancing needs and increased borrowing costs. The report underscores the urgent need for proactive government intervention.
In response to this grim outlook, the OECD advises central banks to “remain vigilant” regarding inflation, even if immediate interest rate hikes are not expected. Crucially, it also advocates for increased investment to revive economies and improve public finances. The report’s final suggestion is for “governments [to] work together to tackle uncertainty and pursue reforms to foster growth and jobs,” emphasizing the shared responsibility to pull the global economy back from the precipice.