Background on the OCDE and Its Relevance
The Organisation for Economic Co-operation and Development (OCDE) is an international organization that promotes policies to improve the economic and social well-being of people around the world. Comprising 38 member countries, it focuses on identifying and addressing key policy challenges faced by its members. The OCDE’s reports and analyses are highly regarded for their insights into global economic trends, making its recent statements on the world’s economic outlook significant.
Current State of Global Growth
According to the OCDE’s latest Interim Economic Outlook, global growth remains better than anticipated despite the full impact of the United States’ tariff hikes not yet being felt. The investment in artificial intelligence (AI) continues to support the U.S. economy, while fiscal support cushions China’s slowdown.
Tariff Impact Not Fully Realized
The OCDE notes that the total impact of the U.S. tariff increases has yet to be felt, as businesses have absorbed much of the impact through narrower margins and inventory build-up. Many companies stockpiled goods before the Trump administration’s tariff hikes, which raised the effective U.S. tariff rate on goods imports to an estimated 19.5% by late August—the highest since 1933, during the Great Depression.
Revised Growth Projections
Global economic growth is expected to slow slightly, reaching 3.2% in 2025 from 3.3% in the previous year, compared to the 2.9% projected by the OCDE in June. However, the organization maintains its 2026 forecast at 2.9%, as inventory-building boosts are fading, and higher tariffs are expected to weigh on investment and trade growth.
U.S. Economic Growth Slowdown
The OCDE predicts that U.S. economic growth will slow to 1.8% in 2025, down from the June forecast of 1.6% and last year’s 2.8%, before further decreasing to 1.5% in 2026—unchanged from previous projections.
China’s Growth Slowdown
In China, growth is expected to decelerate in the second half of the year as exporters rush to ship goods before U.S. tariffs take effect and fiscal support wanes. Nevertheless, China’s economy is projected to grow 4.9% this year, up from June’s 4.7%, before slowing to 4.4% in 2026—an upward revision from 4.3%.
Eurozone and Japan Growth
Trade tensions and geopolitical factors counteract the growth boost from interest rate cuts in the eurozone, where the economy is expected to grow 1.2% this year—up from 1.0% previously—and 1.0% in 2026, driven by increased public spending but weighed down by austerity measures in France and Italy.
Japan’s economy is expected to benefit from strong corporate profits and investment rebounds, lifting growth to 1.1%—up from 0.7% previously—before the impetus fades, and expansion slows to 0.5% in 2026—revised upward from 0.4%.
UK Growth Projection
The OCDE has revised up its growth forecast for the United Kingdom from 1.3% to 1.4% this year, while maintaining its 2026 projection at 1.0%, unchanged from before.
Monetary Policy Expectations
Given the slowing growth, the OCDE anticipates that most major central banks will either reduce borrowing costs or maintain an accommodative monetary policy over the next year, assuming inflationary pressures continue to decline.
The Federal Reserve is expected to keep cutting rates as long as job market weakness persists, unless higher tariffs trigger increased inflation.
Gradual interest rate cuts are projected in Australia, the United Kingdom, and Canada, while the European Central Bank (ECB) is expected to remain steady with inflation near its 2% target.
Japan, however, is expected to raise rates as it continues its gradual exit from ultra-loose monetary policy.
Key Questions and Answers
- What is the current state of global growth according to the OCDE? Global growth remains better than anticipated despite the full impact of U.S. tariff hikes not yet being felt.
- How have businesses absorbed the impact of tariff hikes? Businesses have absorbed much of the impact through narrower margins and inventory build-up.
- What are the revised growth projections for major economies?
- Global: 3.2% in 2025, 2.9% in 2026
- U.S.: 1.8% in 2025, 1.5% in 2026
- China: 4.9% in 2020, 4.4% in 2026
- Eurozone: 1.2% in 2020, 1.0% in 2026
- Japan: 1.1% in 2020, 0.5% in 2026
- United Kingdom: 1.4% in 2020, 1.0% in 2026
- What factors are influencing monetary policy expectations? Central banks are expected to maintain accommodative policies as long as inflationary pressures decline.
