The Organization for Economic Cooperation and Development (OECD) in September 2025 issued its Economic Outlook Interim Report, subtitled “Finding the Right Balance in Uncertain Times”.

According to the report, global growth was more resilient than anticipated in the first half of 2025, particularly in many emerging-market economies. Industrial production and trade benefited from front-loading ahead of higher tariffs. In the United States, strong investment linked to artificial intelligence boosted outcomes, while in China fiscal support outweighed the drag from trade headwinds and weakness in the property market.

Since May 2025, the United States has raised bilateral tariff rates on almost all countries. The overall effective US tariff rate reached an estimated 19.5% at the end of August, the highest level since 1933.

The full impact of these tariff increases has not yet been felt, as many changes are being phased in and companies initially absorbed part of the increases through lower margins. However, the effects are becoming more visible in spending decisions, labor markets, and consumer prices.

Labor markets are showing signs of softening. Unemployment rates are rising and job openings relative to the number of unemployed are declining in some economies, including the United States.

Disinflation has slowed in many economies. Rising food prices have contributed to a resurgence of goods inflation, while services inflation has generally remained persistent.

Financial market conditions have eased in recent months in both advanced and emerging-market economies. Asset prices are buoyant, credit provision has improved, and corporate bond spreads are low. Nonetheless, asset valuations appear stretched, and concerns about fiscal risks are growing.

Global GDP growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026, as front-loading ends and higher tariff rates and ongoing policy uncertainty weigh on investment and trade.

In the United States, annual GDP growth is expected to decline from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026. Strong investment growth in high-technology sectors will be more than offset by higher tariff rates and reduced net immigration. In the euro area, GDP growth is projected at 1.2% in 2025 and 1.0% in 2026, with increased trade frictions and geopolitical uncertainty partially offset by easier credit conditions. Growth in China is projected at 4.9% in 2025 and 4.4% in 2026, reflecting the unwinding of front-loading, the impact of higher tariffs, and fading fiscal support.

Inflation is projected to decline in most G20 economies as economic growth slows and labor market pressures ease. Headline inflation in the G20 is projected to fall from 3.4% in 2025 to 2.9% in 2026, while core inflation in advanced G20 economies is expected to remain broadly stable at 2.6% in 2025 and 2.5% in 2026.

Significant risks to the outlook remain. Additional increases in bilateral tariff rates, renewed inflationary pressures, heightened fiscal concerns, or a sharp repricing of financial market risks could reduce growth relative to the baseline. High and volatile valuations of crypto-assets also create financial stability risks due to growing interconnectedness with the traditional financial system. On the upside, easing trade restrictions or faster development and adoption of artificial intelligence could strengthen growth prospects.

Countries must find ways to cooperate more effectively within the global trading system. Trade policy needs to become more transparent and predictable while still addressing economic security concerns.

Central banks should remain vigilant and respond promptly to shifts in risks to price stability. As long as inflation expectations remain anchored, reductions in policy interest rates should continue in economies where underlying inflation is projected to move towards target. Preserving central bank independence will help maintain policy credibility and reduce both the volatility and persistence of inflation.

Financial stability risks need to be addressed through effective monitoring, supervision, and robust regulatory policies.

Fiscal discipline is required to safeguard long-term debt sustainability and maintain the capacity to respond to future shocks. Credible medium-term budgetary adjustment paths, combined with stronger efforts to contain and reallocate spending and to enhance revenues, are essential to stabilize debt burdens.

According to the OECD, structural reforms must be stepped up to improve living standards in a durable way and to unlock the potential gains from new technologies such as artificial intelligence.