Paris: The Organization for Economic Cooperation and Development (OECD) has raised concerns about growing threats to the global economy, including trade tensions, geopolitical conflicts, and fiscal challenges, which could undermine its recent stability. In a new report, the Paris-based institution highlighted the remarkable resilience of the global economy in recent years, with steady growth and declining inflation, but warned of significant uncertainties ahead.
OECD Chief Economist Álvaro Pereira forecasts a 3.3 per cent global economic expansion for the next two years but cautions that rising trade protectionism and geopolitical tensions could disrupt supply chains, inflate consumer prices, and dampen growth.
“Policy decisions by politicians and central banks are critical at this juncture to manage these risks and foster stronger, more sustainable growth,” Álvaro Pereira noted.
Key Risks and Regional Insights
The report, published weeks before Donald Trump’s inauguration as U.S. president, avoids naming him directly but underscores the potential fallout from his trade policies. The OECD warns that new tariffs and protectionist measures could destabilize global trade and energy markets, with wider economic implications.
China, the world’s second-largest economy, is expected to decelerate to 4.4 per cent growth by 2026 due to high savings rates and continued challenges in the real estate sector. The OECD also flags concerns about further credit disruptions in China, which could hinder its economic adjustment process.
In Europe, France faces political uncertainty, with a no-confidence vote looming over government budget disputes. The OECD stresses the importance of resolving fiscal policy disagreements to reassure markets and support recovery. Meanwhile, Germany is projected to grow by only 0.7 per cent in 2025, the slowest among G-7 economies.
Recommendations And Debt Warnings
The OECD advocates concerted monetary, fiscal, and structural policy efforts to mitigate risks. Central banks in advanced economies are advised to proceed cautiously with monetary easing to avoid unsettling inflation expectations or financial markets.
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Additionally, governments are urged to use the current window of opportunity to address public debt, which is forecasted to rise significantly in the coming years. For the OECD, public debt is projected to reach 117 per cent of GDP by 2026, a nine-percentage-point increase from pre-pandemic levels. Italy and Japan are expected to see continued growth in debt-to-GDP ratios, reflecting persistent fiscal challenges.
Despite these risks, the U.S. economy is predicted to maintain robust growth, slowing only slightly to 2.4 per cent in 2025 - well above the G-7 average. The report underscores the need for proactive policymaking to navigate a complex global landscape and sustain economic momentum.
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