OECD lifts 2026 global growth forecast to 2.9% despite Mideast war

The Organisation for Economic Co-operation and Development (OECD) has raised its global growth forecast for 2026 to 2.9 percent, despite the ongoing conflict in the Middle East. This is a 0.1-point increase from their June estimates, which were 2.8 percent. The group of 38 industrialised nations believes that economic growth remains resilient in many countries, despite soaring energy prices due to recent strikes by the United States and Israel against Iran in February.

They attribute this resilience to supportive financial conditions, including rising equity markets and continuous access to credit.

The OECD attributes the cushioning of the economic impact on the global economy to factors such as sizeable oil inventories, additional supply from outside Gulf economies, and government support measures. They also highlight the substantial investments in artificial intelligence, which they predict could lead to stronger growth than initially projected.

However, global growth has slowed significantly from the 3.4 percent growth recorded last year. The OECD has reduced their 2027 growth forecast by 0.1 percentage point to 3 percent. To combat inflation pressures caused by high oil and gas prices, governments have begun raising interest rates. This has resulted in record-high borrowing costs for countries worldwide, grappling with substantial debt and deficits.

The OECD warns of the potential for prolonged inflation if the Middle East conflict continues, with price increases in the G20 group of developing and emerging economies expected to reach 4.1 percent this year. Other significant downside risks include weather-related supply shocks, such as a strong El Nino, which could adversely impact agricultural production and further drive up food prices.

For the United States, the OECD anticipates GDP growth of 2.2 percent this year, up 0.2 points from their June forecast. In the eurozone, growth is projected at 1 percent, also up 0.2 points from the previous estimate. Japan's growth is now seen at 0.8 percent, up 0.2 points from the previous forecast, while China's economy growth remains steady at 4.5 percent.