The global economic landscape is showing clear signs of slowing, according to the OECD’s Interim Economic Outlook (September 2025). Global growth is expected to ease from approximately 3.3% in 2024 to 3.2% in 2025, and further decline to around 2.9% in 2026. The slowdown reflects a convergence of risks, including rising tariffs, geopolitical tensions, inflationary pressures, and tighter monetary conditions.
This cooling trend is not uniform across countries or regions. Advanced economies are struggling with persistent inflation and tighter financial conditions, while some emerging markets maintain moderate growth, supported by domestic demand and policy stimulus. The OECD highlights that the interplay between trade conflicts, policy adjustments, and structural economic changes will be decisive in shaping the near-term growth trajectory.
Revised Growth Projections
The OECD’s latest figures underline a modest deceleration in global growth, signaling that the post-pandemic recovery is stabilizing but losing momentum. While global GDP growth remains positive, the downward revision reflects the cumulative impact of geopolitical tensions, higher interest rates, and supply chain disruptions.
Emerging economies such as India, Southeast Asian nations, and parts of Latin America continue to show resilience, supported by domestic consumption, infrastructure investments, and digital sector growth. However, advanced economies, particularly the U.S. and Eurozone countries, face structural headwinds that could restrain growth, including slowing consumer spending and lingering debt pressures.
Key Risks to Global Growth
One of the primary risks to global growth is the rising trade barriers. The effective U.S. tariff rate on merchandise imports has reached historic highs, disrupting global supply chains and increasing costs for businesses worldwide. While companies have temporarily mitigated the shock through inventory management and narrower profit margins, prolonged trade tensions could suppress investment, slow exports, and weigh heavily on economic momentum in both advanced and emerging economies.
Geopolitical tensions continue to create uncertainty for global markets. Conflicts and political instability in regions such as Eastern Europe, the Middle East, and parts of Africa disrupt trade flows, reduce investor confidence, and increase commodity price volatility. These tensions can slow cross-border investment and amplify risks for countries reliant on international trade.
Persistent inflation pressures are another major challenge. Rising prices in key sectors such as food, energy, and housing strain household budgets and reduce consumer spending power. High inflation also complicates monetary policy decisions, as central banks must carefully balance interest rate adjustments to control prices without stifling growth, creating a delicate policy environment.
Financial market instability adds an additional layer of risk. Volatility in equities, bonds, and emerging sectors such as cryptocurrencies can ripple across global markets. Tightening financial conditions, coupled with sudden shocks in investor sentiment, could disrupt capital flows, increase borrowing costs, and limit economic growth prospects.
Finally, climate and environmental challenges pose a growing risk to economic stability. Extreme weather events, rising energy costs, and resource scarcity affect production, trade, and supply chains, particularly in emerging markets that are more vulnerable to environmental shocks. Failure to mitigate these risks could amplify the impact of other economic pressures and slow global growth further.
Regional Outlooks
United States: The U.S. economy is projected to grow by 1.8% in 2025, underpinned by investments in AI and technology, fiscal stimulus measures, and moderate recovery in consumer spending. However, growth is expected to decelerate to 1.5% in 2026 due to higher trade tariffs, softening labor markets, and potential volatility in financial markets. Federal Reserve monetary policy adjustments, including anticipated rate cuts, may provide temporary relief but will not fully offset global and domestic headwinds.
China: Growth is projected at 4.9% in 2025, supported by domestic consumption, infrastructure investment, and continued policy support for the industrial sector. However, tapering stimulus measures and structural reforms could slow expansion to 4.4% in 2026. Trade tensions and regulatory tightening in sectors such as real estate and technology remain important risk factors.
United Kingdom: The UK is facing the highest inflation among G7 countries, with rates expected to peak at 3.5% in 2025. GDP growth is projected at 1.4% in 2025, slowing further to 1% in 2026 due to fiscal tightening, trade challenges, and residual post-Brexit economic adjustments. Rising energy costs and consumer price pressures could limit household spending, impacting overall growth.
Eurozone: The Eurozone is expected to grow at around 1.6% in 2025, with growth slowing to 1.3% in 2026. Structural challenges include high debt levels in Southern Europe, declining industrial output in Germany, and persistent inflationary pressures. Policy coordination across EU members will be crucial to sustaining growth and managing financial risks.
Emerging Markets: Certain emerging economies, including India, Southeast Asia, and parts of Latin America, are projected to maintain moderate growth, largely supported by domestic demand, digital transformation, and targeted government stimulus. However, exposure to global trade disruptions and commodity price volatility remains a concern.
Policy Recommendations
The OECD emphasizes the need for coordinated international efforts to address the challenges facing global growth. One critical area is reducing trade barriers. Strengthening multilateral trade agreements and avoiding unilateral tariff escalations can help stabilize global trade flows, encourage investment, and prevent further disruption in supply chains. International cooperation in trade policy will be key to supporting both developed and emerging economies.
Monetary policy coordination is another priority. Central banks must carefully balance controlling inflation with supporting economic growth, especially in advanced economies burdened with high debt levels. Prudent interest rate management and liquidity support can help mitigate financial stress while sustaining consumer and business confidence.
Fiscal stimulus and infrastructure investment remain important tools for maintaining domestic demand, particularly in emerging markets. Targeted government spending on infrastructure projects, technological modernization, and social programs can boost employment, strengthen industrial capacity, and stimulate long-term economic growth.
Integrating climate and energy policies into economic planning is also critical. Supporting renewable energy development, energy efficiency, and climate resilience measures can reduce exposure to energy price volatility and environmental risks. These steps not only protect economies from external shocks but also align with long-term sustainability goals.
Finally, maintaining financial stability is essential to prevent systemic risks from derailing growth. Monitoring capital flows, regulating emerging financial sectors, and ensuring adequate liquidity in markets can minimize volatility. Early interventions and robust financial oversight help economies navigate periods of uncertainty, protect investor confidence, and maintain overall economic resilience.
The OECD’s Interim Economic Outlook underscores a period of slower global growth, where advanced economies face structural headwinds and emerging markets act as a relative stabilizer. While growth remains positive, risks from trade tensions, inflation, geopolitical uncertainty, and financial volatility are intensifying.
Policymakers, investors, and businesses must navigate this complex environment with strategic foresight. Measures to enhance trade cooperation, stabilize financial markets, and support domestic demand will be critical to sustaining growth and avoiding deeper economic slowdown.
As the world economy approaches 2026, the interplay of domestic policy choices, global trade dynamics, and structural economic trends will determine whether growth can be maintained at a sustainable pace or continues to cool under mounting pressures.
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