The Organization for Economic Cooperation and Development forecasts that the global economy is expected to accelerate in 2025, driven by recovering markets and ongoing advancements in key sectors. While the outlook reflects optimism, rising tariffs and escalating trade tensions pose significant risks to sustained recovery. Balancing these challenges will require coordinated efforts from policymakers to ensure a resilient and inclusive global economy.
Outlook on Economic Acceleration
The global economy is forecast to grow by 3.3% in 2025, slightly improving from this year’s 3.2%, according to the OECD’s latest report. This optimistic projection comes from easing inflationary pressures and steady growth in key regions. Notably, the US economy is expected to expand at 2.4%, exceeding earlier predictions of 1.6%.
Trade tensions and protectionist policies, particularly in the US, could derail growth by increasing tariffs and inflation. Fiscal imbalances also remain a challenge, with large budget deficits in nations such as the US and France threatening financial stability. The OECD stresses the need for fiscal discipline to ensure public finances remain sustainable.
Emerging Concerns and Regional Economies
India and China continue to lead as bright spots in the global economy. However, China faces challenges from declining real estate prices and weak domestic consumption. Meanwhile, the OECD has adjusted growth projections for Europe, at the same time lowering Germany’s forecast due to infrastructure and productivity concerns while slightly raising expectations for the UK following new government measures.
On the other hand, the inflation rates are expected to ease and align with central bank targets by 2026. The OECD recommends cautious interest rate reductions to maintain stable service prices. In the US, the Federal Reserve’s rates may fall to 3.25%-3.5% by early 2026, while the European Central Bank is expected to reduce rates to 2% by the end of 2025.
Real GDP Growth Forecasts
The following table shows forecasts calculated on a yearly basis.
| 2024E | 2025E | 2026E | |
|---|---|---|---|
| World | 2.7% | 2.7% | 2.6% |
| US | 2.8% | 2.5% | 2.3% |
| Euro Area | 0.8% | 0.8% | 1.0% |
| Germany | -0.1% | 0.3% | 0.8% |
| France | 1.1% | 0.7% | 1.0% |
| Italy | 0.5% | 0.6% | 0.9% |
| Spain | 3.0% | 2.0% | 1.5% |
| China | 4.9% | 4.5% | 4.0% |
| Japan | -0.2% | 1.2% | 1.1% |
| UK | 0.9% | 1.3% | 1.3% |
| Canada | 1.1% | 1.9% | 2.0% |
| India | 6.7% | 6.3% | 6.7% |
| Brazil | 3.1% | 2.0% | 2.3% |
| Russia | 3.5% | 1.2% | 2.1% |
Impact of Technological Advancements
The global economic growth forecast for 2025 depends on advancements in technology, particularly in sectors like artificial intelligence, clean energy, and automation. As these technologies continue to evolve, they are expected to boost productivity and efficiency, particularly in developed economies. For instance, the widespread adoption of automation in manufacturing and services could lead to substantial cost savings, improved output, and, ultimately, faster economic growth across both emerging and advanced markets.
Geopolitical Risks and Tariff Impacts
One of the main risks to the projected growth is the potential for rising trade tensions. While global inflation is expected to ease, the introduction of higher tariffs, particularly by major economies like the US and China, could disrupt supply chains and slow down economic expansion. Analysts warn that any sharp escalation in trade disputes could result in higher consumer prices and a contraction in global trade volumes, which could dampen the growth projections set for 2025.
The Role of Government Fiscal Policies
Governments will play a pivotal role in sustaining economic recovery efforts. Policies aimed at reducing budget deficits and ensuring fiscal sustainability will be crucial. While some nations are seeing budget cuts and tax rises to curb deficits, the global economy will need governments to strike a delicate balance between austerity measures and growth-friendly investments. Failure to do so could impede the pace of economic recovery and limit growth potential, particularly in highly indebted countries.
Emerging Markets Driving Growth
Emerging markets, particularly in Asia, are projected to be significant drivers of global growth in 2025. Economies such as India and Southeast Asia are expected to show resilience with strong domestic demand and increasing foreign investment. However, some countries in Latin America and Africa may struggle with political instability and inflationary pressures, which could delay their ability to contribute significantly to global GDP growth.
A Path Forward for Global Economic Stability
These factors, together with fiscal and monetary policies, will shape the overall global economic landscape as we move into 2025. Continued adaptation to changing trade dynamics and technological innovations will be essential to sustain positive growth rates.
Policymakers must confront the imminent risks of rising tariffs, trade tensions, and inflation in order to ensure sustained global prosperity. Countries may overcome these obstacles and guarantee a solid economic future by encouraging international cooperation, adopting open trade policies, and cultivating budgetary restraint. According to the OECD’s guidelines, managing these risks together will be crucial to maintaining economic stability and resilience in the years to come.
