The global economic outlook is likely to continue to be increasingly volatile in 2025, according to the Organisation for Economic Cooperation and Development (OECD).
This is mainly due to rising trade pressures, lagging consumer and business confidence, and tighter financial conditions. Increased policy uncertainty, particularly concerning tariffs imposed by the US, is also expected to have a significant impact on the global economy, while fuelling inflation.
Global GDP expected to lag in 2025
The OECD expects worldwide gross domestic product (GDP) to slow to 2.9% in 2025, from 3.3% in 2024, assuming current tariff rates remain in place as of mid-May. This forecast is a drop from the OECD’s previous expectations of 3.1%. For 2026, the OECD expects worldwide GDP growth to be 2.9%, down from a previous estimate of 3%.
Countries such as Italy, Norway, France, Mexico and Germany are likely to have the least economic growth in 2025, while Costa Rica, Denmark, Ireland, Poland and Israel are expected to have the strongest growth.
Regarding the OECD’s new forecast, Russ Mould, investment director at AJ Bell said in an email note sent to Euronews: “It’s only a small revision – from 3.1% to 2.9% for 2025 – but it’s still enough to cause investors some digestion as they consume their morning news. The downgrade weighed on the mining sector as the market fears it could mean reduced demand for commodities, and therefore a potential knock to the price of metals and minerals.”
“The 90-day pause on tariffs has just over a month before expiration, meaning the pressure is on countries to do deals with the Trump administration. Reports suggest that Trump wants best offers on trade negotiations by Wednesday, perhaps to avoid any last-minute rush or stalemate situations.”
In 2025, the OECD expects global output to be 2.6%, with the US seeing marginal growth of 1.1%.
Inflation expectations in 2025
The OECD expects inflation across the OECD countries to be 4.2% in 2025, up from its December expectations of 3.7%. Similarly, for 2026, it expects inflation to be 3.2%, which is a step up from an earlier estimate of 2.9%.
Turkey is expected to have the highest inflation in 2025 at 31.4%, with Columbia, Chile, Poland, Estonia and Hungary also likely to continue seeing high prices.
However, Switzerland, Finland, France, Sweden and Costa Rica are expected to see relatively lower inflation in 2025.
Inflation is expected to be 3.6% across the G20 countries in 2025, falling to 3.2% in 2026.
How policymakers can boost economic growth
The OECD suggests that policymakers should attempt to reduce trade barriers in order to support economic growth and look for more collaborative solutions on global trade and political issues, instead of turning to tariffs.
Reforms focusing on enhancing supply chains, as well as diversifying both buyers and suppliers for companies, could go a long way in helping achieve this goal. Similarly, shared or common regulatory standards could ease regulatory challenges between countries.
Turning to monetary policy, the OECD advises that central banks should remain focused on disinflation, while easing interest rates cautiously in those countries where inflation is expected to decline.
The OECD also recommends focusing on creating a more stable and sustainable environment for business investments, especially by reducing policy uncertainty. This could be through policies boosting competition, removing entry barriers and helping entrepreneurship. The OECD also recommends making it easier to access finance.
