OECD lifts U.S., global growth forecasts as economies surprise to the upside

The global economic growth forecast has been revised upwards by the Organisation for Economic Co-operation and Development (OECD), indicating a more resilient performance from many economies in 2025. The OECD now projects a global growth rate of 3.2% for this year, up from the previous forecast of 2.9% in June. However, growth is expected to slow down from 3.3% in 2024 to 2.9% in 2026.

The United States also received an upgraded growth forecast of 1.8% for 2025, compared to the earlier estimate of 1.6% in June. This improvement is attributed to strong AI-related investments and fiscal support in China, despite trade headwinds and weaknesses in the property market. The OECD report highlighted that global growth was more resilient in the first half of 2025, especially in emerging-market economies.

Alvaro Pereira, the chief economist of the OECD, mentioned that economic events in emerging markets like Brazil, Indonesia, and India have contributed to the positive outlook for the world economy. However, he cautioned that most of the G20 countries are expected to experience a slowdown in the latter part of the year after front-loading activities in the first quarter.

Despite the positive outlook, the OECD warned of significant risks to the economic landscape, particularly due to high levels of policy uncertainty and elevated tariffs affecting investment and trade. The impact of sweeping duties on goods entering the U.S. is still unfolding, with tariff rates reaching as high as 50% on exports to the country. The OECD noted that the full effects of tariff increases are yet to be fully felt, but are already influencing spending decisions, labor markets, and consumer prices.

Labour markets in some countries are showing signs of softening, with higher unemployment rates and fewer job openings. The OECD’s Pereira highlighted that the tariff shock is leading to inflationary pressures in many countries, impacting firms globally. The organization revised down its inflation expectations for the U.S. to 2.7% in 2025, from the previous forecast of 3.2%.

Looking ahead, the OECD report identified further tariff increases, inflationary pressures, concerns about the fiscal situation, and potential repricing in financial markets as key risks. Additionally, the report pointed out the risks associated with high and volatile crypto-asset valuations and emphasized the potential benefits of reductions in trade restrictions and advancements in artificial intelligence technologies for strengthening growth prospects.

In conclusion, while the global economic outlook appears positive for 2025, uncertainties and risks persist, necessitating a cautious approach to navigating the evolving economic landscape.