Paris, France

The global economy is showing mounting signs of fatigue, according to the Organisation for Economic Co-operation and Development (OECD), which released its Interim Economic Outlook this week in Paris. The report projects that world GDP growth will slow to 3.2% in 2025 and dip further to 2.9% in 2026, as inflationary pressures, sluggish investment, and the delayed impact of trade disputes converge to darken the global horizon.

For policymakers and markets alike, the OECD’s assessment has sounded an alarm bell: the era of post-pandemic recovery is giving way to a period of fragile expansion, volatile prices, and mounting uncertainty.

Growth Losing Momentum

The OECD warns that the sharp rebound of 2021–2023 is firmly behind us. Global investment, which was once the engine of recovery, has stalled under the weight of higher interest rates and geopolitical uncertainty. World trade, after rebounding briefly, is now hampered by tariffs and sluggish demand in major economies.

“The world economy is still expanding, but the pace is clearly losing steam,” said Mathias Cormann, Secretary-General of the OECD. “Without decisive reforms and international cooperation, risks are tilting to the downside.”

The slowdown is broad-based. The United States, still the world’s largest economy, is forecast to grow at 2.1% in 2025, down from 2.6% last year, as consumer spending cools and the labor market softens. The Eurozone faces even sharper deceleration, with growth expected at 1.2%, dragged by weak demand in Germany and France and ongoing industrial disruptions. China, once the locomotive of global growth, is projected to expand by 4.5%, but momentum is slowing as fiscal stimulus fades and property-sector problems persist.

Inflation: Cooling but Persistent

One of the most complex challenges remains inflation. The OECD notes that while inflation is cooling from the double-digit highs of 2022, core inflation remains “sticky” in many economies, reflecting persistent price pressures in services, housing, and energy.

In the United States, headline inflation has fallen close to 3%, but wage growth and housing costs keep underlying inflation elevated. Europe faces its own struggles, with food and energy prices still volatile. Developing economies, meanwhile, are suffering the most from imported inflation and a strong U.S. dollar, which raises the cost of servicing foreign debt.

“Inflation is retreating, but it has not been defeated,” warned OECD Chief Economist Álvaro Pereira. “Central banks must tread carefully to avoid choking growth while ensuring that inflation expectations remain anchored.”

Trade Tensions and Policy Risks

A key factor in the OECD’s gloomy outlook is the growing weight of trade restrictions. Tariffs imposed by the United States and retaliatory measures from China are beginning to ripple through supply chains. Although the full impact has not yet been realized, early indicators show declining exports, disrupted production, and rising costs for manufacturers.

In Europe, the aftershocks of the Jaguar Land Rover cyberattack, which forced extended shutdowns at key UK plants, highlight the vulnerability of industrial supply chains. Across Asia, weaker demand for electronics and semiconductors has added to the slowdown, raising concerns about the health of global trade networks.

The OECD cautions that policy missteps—particularly a premature easing of interest rates or poorly coordinated fiscal measures—could amplify volatility rather than stabilize markets.

Safe Havens Rise: Gold Surges to Record Highs

Financial markets have reacted to global uncertainty with a flight to safety. Gold prices have soared to historic highs, reaching $3,759 per ounce, marking the strongest rally since 1979. Investors, unnerved by geopolitical tensions and slowing growth, are increasingly hedging against currency volatility and stock market risks.

“Gold has become the ultimate barometer of fear,” said Sarah Lane, a commodities strategist at HSBC. “The surge reflects not only inflation concerns but a deep unease about the fragility of the global economy.”

Stock markets have wobbled but remain resilient in the face of uncertainty, buoyed by expectations that central banks may begin easing rates in late 2025 if inflation continues to decline.

Uneven Impact Across Regions

The OECD notes that the slowdown will hit economies unevenly:

   •   Advanced economies will face slower consumption growth as households grapple with high borrowing costs.

   •   Emerging markets risk capital flight, currency depreciation, and rising debt burdens, particularly in Africa and Latin America.

   •   Export-driven economies like South Korea and Germany will be hardest hit by weakening global trade flows.

Some countries, however, may benefit. Resource-rich nations are seeing windfalls from surging commodity prices, while Middle Eastern economies are using oil revenues to diversify into renewable energy and technology.

Policy Prescriptions

The OECD urges governments to balance prudence with proactivity. Key recommendations include:

1. Fiscal Responsibility: Avoid excessive borrowing, but use targeted support to shield vulnerable households.

2. Investment in Resilience: Channel resources into infrastructure, digitalization, and green technologies to boost long-term growth.

3. Trade Cooperation: Resist protectionist measures and revitalize multilateral trade institutions.

4. Debt Management: Coordinate with international lenders to support developing economies facing unsustainable debt.

“Global coordination is not a luxury—it is a necessity,” Cormann stressed.

Outlook: Fragile Growth, Rising Uncertainty

The OECD’s projections underscore a sobering reality: the global economy has entered a new phase defined by fragility and volatility. Unlike the synchronized rebound of the early 2020s, today’s expansion is fragmented, uneven, and vulnerable to shocks.

As inflation lingers, trade disputes escalate, and supply chains falter, policymakers face a difficult balancing act: keeping growth alive without stoking further instability. The rise of safe havens like gold suggests that markets remain unconvinced that a soft landing is guaranteed.

For now, the global economy is treading water. Whether it sinks into stagnation or regains momentum will depend on the choices made in capitals from Washington and Beijing to Brussels and Brasília. The stakes could not be higher.