What's happened
The OECD projects modest global economic slowdown from 3.2% in 2025 to 2.9% in 2026, citing trade tensions and tariffs. US growth is revised up to 2%, while China and Europe see steady or slightly improved forecasts. Inflation is expected to ease by 2027.
What's behind the headline?
The OECD's outlook underscores the resilience of the global economy despite rising trade tensions and policy uncertainty. The modest slowdown reflects the impact of tariffs and trade policy shifts, particularly in the US and China. The forecast for inflation easing indicates central banks will maintain or lower interest rates, supporting continued growth. However, the risk remains that trade tensions could escalate, further dampening investment and consumption. The US's revised growth upward suggests that AI investments and fiscal measures are offsetting tariff impacts, but the long-term sustainability of this support remains uncertain. Europe's resilience, driven by labor markets and public spending, may be challenged by fiscal tightening in some countries. Overall, the outlook signals cautious optimism, with growth expected to stabilize but vulnerable to geopolitical and trade disruptions.
What the papers say
The Al Jazeera article highlights the OECD's cautious outlook, emphasizing the potential for trade tensions to slow growth further and the risk of stock market corrections if AI optimism is unmet. It notes that the US economy is forecast to grow 2% in 2025, revised upward from earlier predictions, supported by AI investment and fiscal measures. The AP News piece provides a broader context, noting the OECD's slight downgrade from 3.3% in 2024 to 3.2% in 2025, and emphasizing the impact of US trade policy shifts under Trump, which have introduced tariffs that are now less severe than initially threatened. Both sources agree that trade policy uncertainty and tariffs are key risks, but differ in focus: Al Jazeera emphasizes the potential market correction and trade tensions, while AP highlights the resilience of the global economy and the role of AI investments. The contrasting perspectives illustrate a nuanced picture: while growth remains steady, underlying risks persist, and market sentiment will hinge on trade developments and policy responses.
How we got here
The OECD's latest forecasts reflect ongoing trade tensions, notably US tariffs introduced under the Trump administration, which have impacted global trade and investment. Despite these challenges, investment in AI and fiscal support have helped sustain growth. The forecasts also consider fading fiscal support in China and the eurozone, with inflation gradually returning to target levels by mid-2027.
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The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.
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China, officially the People's Republic of China, is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion in 2019.