OECD Warns of Further Economic Downturn if Trade Restrictions Persist
The Organisation for Economic Co-operation and Development (OECD) has expressed concerns over a potential further dampening of the global economic growth in the coming years if trade restrictions persist.
According to its interim report published on Monday, the OECD predicts a contraction of around 0.5 percent for its member states in the event of a further escalation of US tariffs. Mexico, the United States and Canada would be particularly affected, with projected declines of 1.1, 0.7 and 0.6 percent, respectively. The Euro-Zone is expected to see a 0.1 percent decline.
The global economic growth forecast for 2025 has been revised downward to 3.1 percent, compared to the global GDP and to 3.0 percent for 2026, down from the previous 3.3 percent. Germany is expected to see a 0.4 percent growth in 2025 and a 1.1 percent growth in 2026, according to the OECD.
The report also notes that inflationary effects are still being felt in many countries. For the G20 countries, the inflation rate is expected to fall from 3.8 percent in 2025 to 3.2 percent in the following year, with Germany’s inflation rate expected to decline from 2.4 to 2.0 percent.
The OECD recommends that central banks remain vigilant regarding the potential for rising trade costs, which could lead to higher prices and wages. The organisation also advises a reduction in government spending and emphasizes the need for “ambitious” structural reforms to ensure a foundation for future growth. Specifically, the report mentions the need to reduce regulatory hurdles, flexibilize labor resources and expand general and vocational education opportunities.