Global growth is holding up better than expected as an artificial intelligence investment boom helps offset some of the shock from US tariff hikes, the OECD said today, nudging up its outlook for some major economies.
The Paris-based organisation warned, however, that global growth was vulnerable to any new outbreak of trade tensions while investor optimism about AI could trigger a stock marketcorrection if expectations are not met.
In its Economic Outlook, the Organisation for EconomicCooperation and Development forecast global growth would slowmodestly from 3.2% in 2025 to 2.9% in 2026, leaving itsforecasts untouched from its last estimates in September. It predicted a rebound to 3.1% in 2027.
OECD head Mathias Cormann said the trade shocks triggered by US President Donald Trump's tariff hikes had so far provedrelatively mild, but added their costs were likely to rise.
"The full effects of those higher tariffs since the start ofthe year will become clearer as firms run down the inventoriesthat they built up," he told a press conference.
Upgraded growth forecasts for 2025, but risks remain
The US economy is forecast to grow 2% in 2025, revised upfrom 1.8% in September, before slowing to 1.7% in 2026 - up from 1.5% predicted in September.
AI investment, fiscal support and expected Federal Reserverate cuts are helping offset the drag from tariffs on imported goods, reduced immigration and federal job cuts, the OECD said.
However, it warned that the Trump administration had put US fiscal policy on an unsustainable trajectory with large budget deficits and rising debt that would require a "significant adjustment" in the coming years.
China's growth is expected to hold steady at 5% in 2025, up from 4.9% in September, before slowing to 4.4% in 2026 - unchanged from September - as fiscal support fades and new US tariffs on goods imported from China bite.
The euro zone's 2025 growth forecast was revised up to 1.3% from 1.2%, supported by resilient labour markets and increasedpublic spending in Germany.
Growth is expected to moderate to1.2% in 2026 - it was seen at 1% previously - as budget tightening in France and Italy weighs on the outlook.
Japan's economy is projected to grow 1.3% in 2025, up from 1.1%, and buoyed by strong corporate earnings and investment,before slowing to 0.9% in 2026.
Trade and inflation outlook
Global trade growth is expected to moderate from 4.2% in 2025 to 2.3% in 2026 as the full effects of tariffs weigh oninvestment and consumption.
Elevated trade policy uncertainty limits prospects for a recovery.
Inflation is projected to gradually return to central banktargets by mid-2027 in most major economies.
In the US, inflation is expected to peak in mid-2026 due to tariffpass-through before easing.
In China and some emerging markets,inflation is projected to rise modestly as excess production capacity declines.
Most major central banks are expected to maintain or lowerborrowing costs over the coming year as inflation pressuresease.
The Federal Reserve is projected to cut rates slightly bythe end of 2026, barring inflation surprises from tariffs.
