The Organization for Economic Co-operation and Development (OECD) is calling for crucial policy reforms to foster growth and jobs, as it issues a grim forecast for the global economy caught in the throes of a trade war. 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, highlighting the urgent need for structural changes.
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 United States, Canada, Mexico, and China are specifically identified as major contributors to this anticipated global economic decline.
Adding to the concerns, the OECD warns that “protectionism” will lead to increased inflation, causing costs for goods and services to rise. This inflationary pressure, combined with already high debt levels, poses a severe risk for developing nations. The report’s final suggestion is that “governments should work together to tackle uncertainty and pursue reforms to foster growth and jobs.”
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, emphasizing that collaborative policy reforms are essential to navigate the current economic headwinds and restore prosperity.