Investment and sound debt management are the OECD’s prescription to counter the pervasive effects of the ongoing trade war, as the organization slashes its global growth projections. The Organization for Economic Co-operation and Development (OECD) now anticipates a decline in global economic growth from 3.3% in 2024 to 2.9% in both 2025 and 2026, a direct consequence of the challenging economic climate.
The OECD’s latest outlook report emphasizes that “weakened economic prospects will be felt around the world, with almost no exception,” leading to “lower growth and less trade [that] will hit incomes and slow job growth.” The United States, Canada, Mexico, and China are identified as major contributors to this anticipated global economic contraction, highlighting the need for robust policy responses.
Adding to the concerns, the OECD warns that “protectionism” will lead to increased inflation, causing costs for goods and services to rise. This inflationary pressure, combined with already high debt levels, poses a significant risk for developing nations. The report explicitly states that “countries should ensure that public debt is, indeed, on a sustainable path.”
In response to these challenges, the OECD advises central banks to “remain vigilant” regarding inflation. Crucially, it also advocates for increased investment, noting that “boosting investment will be instrumental to revive our economies and improve public finances.” This comprehensive prescription highlights the multifaceted approach required to mitigate the trade war’s impact.