Global growth remains in better shape than expected, as booming investment in artificial intelligence helps offset some of the impact of rising U.S. tariffs, the OECD said on Tuesday, raising its outlook for some major economies.
The Paris-based organization warned, however, that global growth was vulnerable to any new outbreak of trade tensions, and that investor optimism about artificial intelligence could trigger a stock market correction if expectations are not met.
In its Economic Outlook Report, the Organization for Economic Cooperation and Development forecast that global growth would slow modestly, from 3.2% in 2025 to 2.9% in 2026, leaving its forecasts unchanged from its latest September estimates. It predicted a rebound to 3.1% in 2027.
The US economy is forecast to grow 2% in 2025, revised upward from 1.8% in September, before slowing to 1.7% in 2026, down from 1.5% forecast in September.
According to the OECD, investment in artificial intelligence, fiscal support and planned interest rate cuts from the Federal Reserve are helping to offset the drag of tariffs on imported goods, reduced immigration and job cuts at the federal level.
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China’s growth is expected to hold steady at 5% in 2025, down from 4.9% in September, before slowing to 4.4% in 2026 — unchanged from September — as fiscal aid disappears and new US tariffs are applied to goods imported from China.
The euro zone growth forecast for 2025 was revised upwards, from 1.2% to 1.3%, thanks to the resilience of labor markets and increased public spending in Germany. Growth is expected to moderate to 1.2% in 2026, previously forecast at 1%, as budget constraints in France and Italy weigh on the outlook.
The Japanese economy is forecast to grow 1.3% in 2025, up from 1.1% previously, boosted by strong corporate profits and investment, before slowing to 0.9% in 2026.
Global trade growth is expected to moderate from 4.2% in 2025 to 2.3% in 2026, as the full effects of tariffs weigh on investment and consumption. High trade policy uncertainty limits recovery prospects.
Inflation is expected to gradually return to central banks’ targets by mid-2027 in most major economies. In the US, inflation is expected to peak in mid-2026 due to the impact of tariffs, before moderating. In China and some emerging markets, inflation is expected to rise modestly as excess production capacity declines.
For their part, most major central banks are expected to maintain or reduce borrowing costs over the next year as inflationary pressures ease. The Federal Reserve is expected to cut rates slightly at the end of 2026, barring any inflationary surprises from tariffs.
With information from Reuters
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