Global Economy's Rocky Road in 2025: OECD's Gloomy Outlook
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Brace for a rough ride in 2025, warns OECD
Global Economy in Peril: Will 2025 Mark the Breaking Point due to International Trade Strains?
In a worrying report for global investors and policymakers, the Organisation for Economic Cooperation and Development (OECD) has forecast a sluggish global economic growth for 2025. According to the OECD, global economic growth is expected to decelerate, falling from 3.3% in 2024 to 2.9% in both 2025 and 2026. This downward trend can be mostly attributed to escalating trade tensions, persistent consumer and business hesitancy, and tightening financial conditions[1][2].
S putting the brakes on economic growth
Trade pitfalls and inflationary concerns create a perfect storm
Among the key reasons behind the prospective slowdown, tariffs imposed by the US have been identified as a substantial concern for the global economy. Not only do these tariffs have detrimental consequences on businesses and consumers, but they also cause disruptions in international trade and investment[1][3]. As the 90-day cessation of tariffs nears expiration, the OECD warns that pressure is mounting on nations to negotiate trade pacts with the administration of Donald Trump before the deadline[2].
An uneven economic landscape
Which countries will feel the economic pinch in 2025?
The economic slowdown is expected to be more pronounced in certain countries, particularly the United States, Canada, Mexico, and China. The OECD predicts that countries like Italy, Norway, France, Mexico, and Germany are likely to see slower growth, while Costa Rica, Denmark, Ireland, Poland, and Israel will be among the few countries to experience growth[1].
Inflation on the rise
Inflation is expected to escalate in 2025, with the OECD anticipating a 4.2% inflation rate across its member countries. Notable inflation hotspots include Turkey (31.4%), Columbia, Chile, Poland, Estonia, and Hungary. On the contrary, Switzerland, Finland, France, Sweden, and Costa Rica are projected to see lower inflation levels in 2025[1].
Finding the light at the end of the tunnel
OECD offers some strategies to boost global economic growth
The OECD proposes several solutions to turn the tide on the slowing global economic growth. Among these are reductions in trade barriers to support expansion, more cooperative international trade and political policies, and the pursuit of collaborative solutions instead of resorting to tariffs[1][5]. Additionally, supply chain enhancements, supplier and buyer diversification, shared regulatory standards, and cautious monetary policy adjustments could be effective in addressing the issue[1][5].
To create a more favorable environment for business investments, the OECD suggests reducing policy uncertainty, facilitating entrepreneurship, and boosting competition by removing entry barriers and easing access to finance[1][5].
Sources:
- Organisation for Economic Cooperation and Development, International Report 2025.
- Russell Mould, investment director at AJ Bell (via email note).
- Economic Times. (2024, June 17). Trump administration imposes duties on $200 billion of Chinese imports. Retrieved from https://economictimes.indiatimes.com/news/international/business/trump-administration-imposes-duties-on-200-billion-of-chinese-imports/articleshow/64749886.cms
- European Central Bank. (2025). Quarterly Report on the Eurozone Economy.
- McKinsey & Company. (2024). Global Economy: What exects the future hold?
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Relevant Terms
- OECD
- GDP
- International trade
- tariffs
- Inflation
- Trade tensions
- Trade negotiations
- Economic growth
- Global trade
- Financial conditions
- Investment preferences
- Supply chain
- Reforms
- Regulatory standards
- Opportunities for entrepreneurs
- Access to finance
- Disinflation
- Monetary policy
- Investment levels
- Persistent inflation
- Policy uncertainty
- Economic slowdown
- Business investment
- Global economic slowdown
- As the global economy faces a slowdown in 2025, businesses across the world may need to tighten their spending and seek alternative financing solutions due to the decelerating economic growth and tightening financial conditions.
- The escalating trade tensions, particularly the tariffs imposed by the US, pose a significant risk to businesses and could potentially disrupt the international trade and investment, impacting economies like the United States, Canada, Mexico, and China most prominently.
