The global economy is facing a significant slowdown, with the Organization for Economic Co-operation and Development (OECD) pointing to the United States, Canada, Mexico, and China as key drivers of this decline. 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, largely due to the escalating trade war.
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 pervasive negative impact on livelihoods globally. The report specifically identifies these four major economies as contributing significantly to the anticipated global economic contraction.
Further compounding the challenges, the OECD warns that “protectionism” will lead to increased inflation, causing costs for goods and services to rise. This inflationary pressure, coupled with already high debt levels, poses a severe risk for developing nations, which may struggle with refinancing needs and increased borrowing costs. The report highlights the interconnectedness of these global economic challenges.
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, though it acknowledges the difficulty for governments already burdened by debt to finance such crucial initiatives, emphasizing shared responsibility.