The Organisation for Economic Co-operation and Development (OECD) has revised its global economic growth forecast for 2025, lowering the projected expansion rate to 3.1%, down from an earlier estimate of 3.2%. This adjustment, detailed in the OECD’s Interim Economic Outlook, highlights growing global economic pressures that are expected to hinder growth momentum in the near future. The primary factors contributing to this more cautious economic outlook include rising trade barriers, geopolitical instability, and tightening financial conditions.
The economic slowdown is expected to impact regions differently, with specific risks emerging for major economies. In the United States, the forecast for growth has been significantly downgraded. After a 2.8% GDP increase in 2024, the U.S. economy is now projected to grow by only 2.2% in 2025. This deceleration is largely attributed to the Federal Reserve’s ongoing interest rate hikes, which were implemented to curb persistent inflation. While these higher rates have been effective in controlling inflation, they have also increased borrowing costs, which in turn have reduced consumer spending and slowed investment. As a result, U.S. economic growth is expected to be much weaker than previously anticipated.
The Euro Area faces a similarly challenging economic environment. The region’s growth forecast has been downgraded to just 1.0% in 2025, compared to 1.2% in 2024. A combination of factors contributes to this subdued growth, including volatile energy prices, ongoing trade disruptions, and persistent inflationary pressures that have eroded consumer purchasing power. Europe’s economic recovery remains fragile, further burdened by the lingering effects of past financial crises and the ongoing repercussions of the COVID-19 pandemic. These compounded challenges have hindered the region’s ability to regain its full economic strength.
Emerging markets, while still expected to show some growth, are also grappling with a range of uncertainties. These markets may benefit from higher commodity prices and relatively low inflation in certain areas. However, rising inflation, mounting debt, and political instability continue to cloud their prospects. The OECD’s report indicates that these challenges, coupled with global trade disruptions and tighter financial conditions, could lead to uneven growth across emerging economies. The ability of these countries to navigate these domestic and global pressures will be key to determining their future economic stability.
The report also highlights the growing barriers to global trade, a critical issue undermining economic expansion. Protectionist policies and tariffs are on the rise, particularly in the context of the ongoing trade dispute between the U.S. and China. These policies have caused significant disruptions to global supply chains, complicating the international trade environment. With rising economic nationalism and a trend toward reshoring industries, global trade volumes are expected to decrease, creating additional obstacles for economies seeking stronger growth.
Geopolitical risks also play a significant role in the OECD’s outlook. Tensions in various regions, coupled with shifting global power dynamics, have introduced greater uncertainty into the global economy. These geopolitical strains have the potential to escalate, further complicating the task of forecasting stable economic growth. The OECD underscores the importance of international cooperation and multilateral efforts to address these issues and reduce the risk of a more severe economic downturn.
In conclusion, the OECD’s revised economic outlook for 2025 paints a picture of a global economy struggling with significant challenges. Rising trade barriers, political instability, and tighter financial conditions make the global path to recovery slow and fraught with uncertainty. Policymakers will need to proceed with caution and work in coordination to navigate these risks and avoid a deeper economic slowdown. The situation remains delicate, and the possibility of further economic turbulence looms large on the horizon.
