The OECD has downgraded its global growth forecasts for 2025 and 2026, citing US tariffs as a contributing factor. The predicted growth rate for 2025 is now 3.1%, down from 3.3%, with similar reductions in subsequent years. A simulation indicates Mexico could face significant growth declines due to tariffs, while India is expected to lead in growth rates.
The Organisation for Economic Co-operation and Development (OECD) has revised its global growth forecasts for 2025 and 2026, attributing part of the decline to the tariffs initiated under former US President Donald Trump. In its latest report, the OECD now predicts a global growth rate of 3.1% for this year, down from 3.3%, with 2026’s growth forecast also lowered to 3.0% from a previous 3.3%.
The OECD highlighted an overall softening in global growth prospects, citing high policy uncertainty and persistent risks within the economic landscape. “Recent activity indicators point to a softening of global growth prospects,” the report states, warning that the increasing fragmentation of the global economy poses significant concerns. Further hikes in tariffs, especially on non-commodity transactions, could lead to a global output decrease of approximately 0.3% by the third year.
A simulation concerning the impact of 10% tariffs indicates that Mexico could face a substantial 1.3% reduction in growth from the baseline within three years. The United States would likely experience a 0.72% decline in its economy as well. Conversely, the OECD noted that “agreements that lower tariffs from current levels could result in stronger growth.”
Independent of tariff impacts, the OECD projects that India will lead in growth rates, forecasting a 6.4% increase in 2025 and a 6.6% rise in 2026. It appears that Mexico is the only major country anticipated to see a downturn, while Canada is expected to show limited growth. The eurozone’s growth is predicted at 1.0% in 2025, followed by 1.2% in 2026.
The OECD’s revised projections reflect growing concerns over trade tensions and their impact on global economic growth. With significant reductions in growth forecasts for 2025 and 2026, the organization emphasizes the potential negative consequences of increased tariffs. Countries like India are projected to experience robust growth, contrasting with the predicted downturn for Mexico. Overall, the report highlights the importance of trade agreements in enhancing global economic prospects.
Original Source: gna.org.gh
