OECD Warns of Sharp Decline in Global Business Investment

On August 5, 2025, the Organization for Economic Co-operation and Development (OECD) issued a warning about the global economic outlook, highlighting a significant decline in business investment across member countries. The organization attributed this downturn to factors such as geopolitical tensions, supply chain disruptions, and uncertainty in monetary policies, emphasizing that the trend could impede global economic growth and hinder innovation.

The OECD's latest report reveals that net investment across its member countries has sharply declined since the 2008 financial crisis and the COVID-19 pandemic, dropping from 2.5% of GDP to 1.6% for the median country. Only two advanced economies, Israel and Portugal, have exceeded pre-2008 investment trends, and just six exceed pre-COVID trends. Overall, average investment remains 20% below pre-crisis trajectories and 6.7% below pre-pandemic levels.

Álvaro Pereira, the OECD's chief economist, pointed to persistent policy uncertainty as a key factor discouraging investment, exacerbated by events like former President Donald Trump's trade policies. He noted that a rise in uncertainty significantly hampers business investment growth, as firms avoid long-term spending amid unclear regulatory and economic conditions.

The OECD warned that if high uncertainty continues, real investment could drop by another 1.4 percentage points by the end of 2026, further impeding global economic growth and innovation.

The decline in business investment is likely to result in slower economic growth, as investment is a critical driver of productivity and innovation. Supply chain disruptions and trade tensions can lead to increased costs for businesses, potentially resulting in higher consumer prices. Reduced investment may lead to fewer job opportunities and hinder wage growth, affecting overall employment levels.

The OECD called on policymakers to implement measures that would restore business confidence and stimulate investment activities. Recommendations include reducing policy uncertainty by establishing clear and consistent policies to provide businesses with a stable environment for long-term planning, enhancing trade relations through constructive international dialogue to resolve trade tensions and mitigate further economic risks, and investing in infrastructure by increasing public investment in infrastructure projects to stimulate economic activity and create jobs.

The current decline in business investment mirrors trends observed following the 2008 financial crisis and the COVID-19 pandemic, where uncertainty and economic disruptions led to reduced investment activities. However, the present situation is further complicated by ongoing geopolitical tensions and trade disputes.

The OECD's warning underscores the urgent need for coordinated policy actions to address the decline in business investment. By reducing policy uncertainty, enhancing trade relations, and investing in infrastructure, policymakers can work towards revitalizing global economic growth and fostering innovation.