OECD Forecasts Modest Global GDP Slowdown with Highlighted Risks and Regional Insights

The Organisation for Economic Co-operation and Development (OECD) has released its latest Economic Outlook, projecting a modest slowdown in global GDP growth from 3.2% in 2025 to 2.9% in 2026, with a slight rebound to 3.1% in 2027. While the global economy demonstrates resilience, the OECD warns of underlying vulnerabilities and significant risks that could impede future growth.

The report highlights several concerns, including weakening labor markets, as job vacancies have fallen below their 2019 averages in many countries, and declining consumer and business confidence, which could dampen investment and spending. Additionally, the OECD identifies potential risks such as increased trade barriers, financial market volatility, and elevated debt-service burdens that may weigh on economic growth.

OECD Secretary-General Mathias Cormann emphasized the importance of international cooperation to address these challenges. He stated, "Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth."

Regional Economic Insights

In Switzerland, the KOF Institute at ETH Zurich forecasts a slowdown in economic growth for 2026, projecting a growth rate of 1.1%, down from 1.4% in 2025. This deceleration is attributed to weaker international economic conditions, despite a preliminary agreement to reduce U.S. tariffs on Swiss exports from 39% to 15%. However, this agreement is not yet legally binding, adding to economic uncertainty.

Developing Asia presents a more optimistic outlook. The Asian Development Bank (ADB) has raised its growth forecast for the region to 5.1% in 2025, up from 4.8% previously. This improvement is driven by robust demand from high-tech economies and India's faster-than-expected growth. India notably exceeded expectations with an 8.2% growth in the second quarter of its fiscal year, boosting South Asia’s overall projected growth to 6.5% for 2025.

Germany's economy, however, remains in a prolonged phase of weak growth. The Ifo Institute downgraded its growth forecast for 2025 to 0.8% and for 2027 to 1.1%, citing slow adaptation to structural changes, bureaucratic hurdles, and outdated infrastructure. U.S. tariffs are also predicted to weigh on exports, reducing growth by up to 0.6 percentage points in 2026.

Policy Recommendations

The OECD underscores the need for governments to engage constructively to address issues in the global trading system. Secretary-General Cormann stated, "Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth."

Implications

For policymakers, the report highlights the necessity of balancing growth initiatives with risk mitigation strategies. Businesses are advised to understand regional economic trends to inform investment and operational decisions. Consumers should anticipate potential impacts on employment and purchasing power.

The OECD's December 2025 Economic Outlook presents a nuanced view of the global economy, acknowledging its resilience while highlighting vulnerabilities and risks that require careful policy management. The report serves as a critical resource for policymakers, economists, and stakeholders aiming to navigate the complexities of the current economic landscape.