The world economy is set for steady growth in the next two years, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday, but warned that protectionist trade measures pose a major risk, just weeks before Donald Trump is set to return to the White House.
The world economy is poised to grow 3.2% this year and 3.3% in 2025 and 2026 as lower inflation, job growth and interest rate cuts help offset fiscal tightening in some countries, the OECD said in its latest Economic Outlook.
Its latest forecasts were largely in line with its last review dating from September, when it had expected growth of 3.2% this and next year and did not yet have a forecast for 2026.
After global trade sputtered last year, it is rebounding and growth in volumes is set to reach 3.6% next year despite a growing number of measures to restrict the flow of imports, the OECD said.
The Paris-based body that advises industrialized nations on policy matters never named Trump in its updated analysis.
However, with the president-elect vowing to slap tariffs on U.S. trading partners after his return to power next month, it was abundantly clear that the OECD was warning about Trump's possible measures.
It cautioned that "greater trade protectionism, particularly from the largest economies," poses a "downside risk" along with geopolitical tensions and high public debts.
On the campaign trail, Trump threatened blanket tariffs of at least 10% on all imports and, since his election, has vowed to slap 25% import tariffs against Canada and Mexico, top U.S. trade partners.
"Increases in trade-restrictive measures could raise costs and prices, deter investment, weaken innovation and ultimately lower growth," the OECD warned.
"Further increases in global trade restrictions would add to import prices, raise production costs for businesses and reduce living standards for consumers," it added.
During his first term in office from 2017 to 2021, Trump slapped tariffs on certain products from China and other trading partners, including the European Union, but on a smaller scale than the measures he has pledged to take upon his return to the White House.
A recent study by the Roland Berger consultancy calculated the cost of the U.S. measures and likely countermeasures by China and the EU at more than $2.1 trillion through 2029.
Trump is far from the only risk in terms of protectionist measures.
The COVID-19 pandemic and the war in Ukraine showed the dependency of many countries upon global trade, but instead of facilitating the exchange of goods and service many countries have sought to shorten certain supply chains and protect markets.
A spat has also broken out between Brussels and Beijing after the EU imposed import tariffs on Chinese electric vehicles. China has retaliated with tariffs on EU brandy, including cognac.
The OECD noted the global economy has demonstrated "remarkable resilience despite being subject to major shocks such as the pandemic and an energy crisis."
It raised its global growth forecast for next year by 0.1 percentage points from its previous outlook in September, due in large part to the strong performance of the U.S. economy.
As a cooling job market causes consumer spending to moderate, the OECD forecast that U.S. growth would ease from 2.8% this year to 2.4% in 2025 and 2.1% in 2026.
In China, the world's second-biggest economy, growth was seen easing from 4.9% in 2024 to 4.7% in 2025 and 4.4% in 2026 despite monetary and fiscal easing as consumer spending remains sluggish due to high rainy-day savings.
Meanwhile, in the eurozone, investment would benefit from central bank easing, and tight labor markets would support consumer spending, pushing growth up from 0.8% this year to 1.3% in 2025 and 1.5% in 2026.
However, both France and Germany saw 0.3 percentage point cuts to their 2025 growth forecasts, to 0.9% and 0.7%, as both countries face political crises amid mounting fiscal pressure.
The downgraded forecast comes as France's new minority government faces being brought down Wednesday by lawmakers after it forced through the adoption of the social welfare budget.
The Turkish economy is seen expanding by 3.5% this year, which would make it one of the top performers among OECD members, an upward revision from its September forecast of 3.2%.
It expects the economy to grow by 2.6% in 2025, a downgrade from its previous estimate of 3.1%, as "necessary macroeconomic stabilization policies will slow domestic demand."
Tighter financial conditions and ongoing fiscal consolidation will limit household consumption, the organization noted.
It said investment and government consumption would also slow as the effects of the post-earthquake reconstruction wear off.
"However, exports should increase on the back of an improvement in the external environment and a continued revival of international tourism," it noted.
The Turkish economy is projected to rebound in 2026, reaching 4% growth, as the effects of the stabilization policies ease.
U.K. growth was seen picking up from 0.9% this year to 1.7% in 2025 as real income gains and a hike in public spending helped offset the effect of higher taxes, before growth eases back to 1.3% in 2026.
Boosted by economic stimulus measures, Japan was seen rebounding from a 0.3% contraction this year to growth of 1.5% in 2025 before moderating to 0.6% in 2026.
As inflation eases, most major central banks should keep carefully loosening monetary policy with the exception of Japan, the OECD said.
With most governments' public finances under strain, the OECD said they needed to take decisive action to stabilize their debt burdens.
