The global economy is facing mounting challenges, according to the report, with the OECD warning that trade barriers, tightening financial conditions, deteriorating business and consumer confidence, and elevated policy uncertainty could collectively exert significant downward pressure on growth prospects.
The forecast rests on the technical assumption that tariff rates as of mid-May will be sustained, despite ongoing legal challenges, OECD said.
Among the major economies, the United States is expected to experience a gradual economic deceleration, with GDP growth projected to decline from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026. Meanwhile, China's economic expansion is likely to moderate progressively, with projections indicating a slowdown from 5.0% in 2024 to 4.7% in 2025 and a further decline to 4.3% in 2026.
In contrast, for the euro area, GDP growth is projected to strengthen to 1% in 2025 and 1.2% in 2026, unchanged from previous estimates, as foreign demand is seen recovering, according to the report.
The organization warned that Inflationary pressures have resurfaced in some economies. Higher trade costs in countries raising tariffs are expected to push inflation up further, although the impact will be partially offset by weaker commodity prices.
"The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path," OECD Secretary-General Mathias Cormann said. Governments need to engage with each other to address issues in the global trading system through positive and constructive dialogue, keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency, and ultimately growth, he stressed.