Global growth is holding up better than expected, as a boom in investment in artificial intelligence helps offset some of the shock from increased US tariffs, the Organization for Economic Co-operation and Development (OECD) reported on Tuesday (2).
However, the Paris-based organization warned that global growth is vulnerable to any new escalation in trade tensions, while investor optimism about artificial intelligence could lead to a stock market correction if expectations are not met.
In its economic forecasts, the OECD expected global growth to slow modestly from 3.2% in 2025 to 2.9% in 2026, leaving its forecast unchanged from the latest September estimate. The organization expected a recovery of up to 3.1% in 2027.
Predictions about countries
The organization estimated that the US economy should grow by 2% in 2025, from a revised forecast of 1.8% in September, but should slow to 1.7% in 2026 – higher than the forecast of 1.5% in September.
The OECD said investment in artificial intelligence, fiscal support and expected interest rate cuts by the Federal Reserve help offset the impact of tariffs on imported goods, lower immigration and federal employee cuts.
China’s growth is expected to remain stable at 5% in 2025, down from 4.9% in September, before slowing to 4.4% in 2026 as financial support declines and new US tariffs on goods imported from China take effect.
Eurozone growth forecasts for 2025 were revised up from 1.2% to 1.3%, supported by resilient labor markets and increased public spending in Germany. Growth is expected to ease to 1.2% in 2026 – from 1% previously – as budget tightening in France and Italy weighs on the outlook.
For Brazil, the OECD expects growth of 2.4% in 2025 and 1.7% in 2026. In September, the organization forecast growth of 2.3% and 1.7%, respectively. In 2027, the country is expected to grow by 2.2%.
Trade and inflation expectations
Global trade growth is expected to decline from 4.2% in 2025 to 2.3% in 2026, as the full effects of tariffs impact investment and consumption. High trade policy uncertainty limits the prospects for recovery.
The OECD expects inflation to gradually return to central bank targets by mid-2027 in most major economies. In the United States, inflation is expected to peak in mid-2026 due to the passage of tariffs, before declining. In China and some emerging markets, inflation is expected to rise modestly as spare capacity declines.
Expectations indicate that major central banks will maintain or reduce borrowing costs next year as inflationary pressures ease. The organization expects the Federal Reserve to cut interest rates slightly by the end of 2026, barring inflationary surprises from tariffs.