Just another revision?
The OECD is out with some new growth forecasts, and they’re not looking pretty. Estimates for the global economy and the U.S. have been cut further due to “substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence.” Inflation is also projected to be higher through 2026, which will likely prevent Fed rate cuts this year, while public debt levels will need to be addressed and put on a sustainable path.
By the numbers: U.S. growth will slow sharply, dropping from 2.8% last year to just 1.6% in 2025 and 1.5% in 2026. That’s also down from the 2.2% expansion for 2025 predicted before President Trump unveiled “Liberation Day” tariffs in early April. 2025 forecasts for other OECD countries were also scaled back, including China, Canada and Mexico, compared with the past interim outlook.
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“Weakened economic prospects will be felt around the world, with almost no exception,” the OECD declared, adding that the forecasts are “based on the assumption that tariff rates as of mid-May are sustained.” In order to revive growth, the Paris-based organization is recommending the lowering of trade barriers, raising productivity and cutting regulatory costs. It also proposed increasing public investment in energy, digital and critical infrastructures, as well as speeding up construction permits and reforms to spur housing supply.
Track record: The accuracy of OECD outlooks has varied in recent years, with forecasts that are revised fairly often (the latest is the second revision in the past three months). Sudden and severe economic impacts like COVID and broad tariffs can influence projections, as well as the aftermath of those events, like the economic rebound in 2021 and the economic resilience seen in 2023 despite the Federal Reserve’s hiking cycle. When there aren’t as many volatile scenarios or shocks, OECD forecasts have been more in line with actual growth.
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