OECD lifts 2026 global growth forecast to 2.9% despite Mideast war
Economic growth has remained "resilient" in many countries despite the war in the Middle East, the OECD said Wednesday as it slightly raised its GDP forecasts for the year.
The OECD lifted its global growth forecast for 2026 to 2.9 percent, despite the ongoing war in the Middle East. This marks a 0.1-point increase from the June estimates by the Paris-based organization of 38 industrialized countries. The rise in global economic growth, now projected at 2.9 percent, comes despite soaring energy prices following the U.S. and Israel's strikes on Iran in February.
The OECD attributes this resilience to supportive financial conditions, including rising equity markets and continued access to credit. Factors such as sizable oil inventories, additional supply from outside the Gulf economies, and governmental support measures have all contributed to cushioning the economic impact. The group also highlighted the potential for stronger growth due to substantial investments in artificial intelligence, which could outpace projections.
However, global growth has slowed significantly from the 3.4 percent growth observed in 2022, and the OECD has reduced its 2027 growth forecast by 0.1 percentage point to 3 percent. Governments have begun raising interest rates to curb inflation pressures from high oil and gas prices, which have reached unprecedented levels. This has led to elevated government bond yields, reminiscent of those during the 2007-2008 global financial crisis.
The OECD emphasizes the urgent need for governments to enhance efforts in containing and reallocating government spending, improving public-sector efficiency, and bolstering revenues to ensure the sustainability of long-term debt and maintain governments' capacity to respond to significant shocks. The OECD also warns of prolonged inflation if the Middle East conflict persists, projecting price increases in the G20 group of developing and emerging economies at 4.1 percent this year.
Other risks include potential weather-related supply shocks, such as a severe El Nino, which could adversely affect agricultural production and exacerbate food price pressures. For the United States, the OECD anticipates GDP to expand by 2.2 percent this year, up 0.2 percentage points from the June forecast. The eurozone is projected to grow by 1 percent, also up 0.2 points.
Japan's growth is now estimated at 0.8 percent, up 0.2 points, while China's economy, the world's second-largest, remains steady at 4.5 percent. The OECD expects global growth for the G20 to reach 3.1 percent.
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