OECD ups growth forecast but warns of risks from protectionism, geopolitics

(Sharecast News) - Global economic activity is expected to accelerate next year, according to the OECD, but geopolitical instability and protectionist moves by governments threaten to disrupt the path of disinflation and weaken the growth outlook. In its biannual Economic Outlook, the Organization for Economic Cooperation and Development said that global GDP is now forecast to expand by 3.3% in 2025 and 2026, following an estimated 3.2% increase in 2024.

The OECD had previously pencilled in growth holding steady at 3.2% in 2025.

The report stated that the global economy has demonstrated "remarkable resilience" over recent years and growth has stayed steady this year amid falling inflation, record-low unemployment rates and a recovery in international trade.

However, future forecasts are subject to "important downside risks and uncertainties", the OECD said.

"There are increasing risks related to rising trade tensions and protectionism, a possible escalation of geopolitical conflicts, and challenging fiscal policies in some countries," the report said.

Protectionist policies to restrict trade, like the additional tariffs proposed by US president-elect Donald Trump on imports from Canada, Mexico and China, could disrupt supply chains, raise consumer prices and negatively impact growth, the OECD said - though the report did not refer to Trump's measures specifically.

At the same time, the OECD said that future economic shocks could trigger "disruptive corrections" in financial markets, made worse by high debt levels and stretched asset valuations.

"The key policy priorities are to ensure a continued and lasting decline in inflation, enhanced efforts to establish a credible fiscal path that will secure debt sustainability, and ambitious reforms to raise sustainable and inclusive growth in the medium term," it said.