The Organisation for Economic Co-operation and Development on Monday lowered its projections for global growth in 2025 due to "trade barriers" and "uncertainty".
Trade tensions that have erupted since US President Donald Trump returned to the White House are in part responsible for the dampened growth perspectives, the OECD said.
The OECD trimmed back its 2025 projection from 3.3 percent growth to 3.1 percent, "with higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending", while also forecasting inflation "to be higher than previously expected".
The Paris-based OECD's projections were based primarily on weaker expected growth in the United States and the eurozone.
US growth is expected to be 2.2 percent in 2025, down from the OECD's 2.4 percent projection in December, before falling to 1.6 percent in 2026 -- a drop of 0.5 percentage points on the OECD's previous forecast.
Likewise, the eurozone growth projection is down from 1.3 percent three months ago to just 1.0 percent, but will continue its upward trajectory from 0.7 percent in 2024, reaching 1.2 percent in 2026.
China, meanwhile, is expected to maintain healthy growth at 4.8 percent in 2025 and 4.4 percent the following year.
But trade wars sparked by Trump's protectionist policies are due to drive inflation "to be higher than previously expected".
"Core inflation is now projected to remain above central bank targets in many countries in 2026, including the United States," added the OECD, which advises industrialised nations on policy matters, issues regular forecasts on the global economy and identifies factors that could impact growth.
The OECD said its projections took into account new tariffs between the US and its neighbours Canada and Mexico.
However, the OECD did not include new tariffs on trade between the US and China, those imposed on steel and aluminium, nor any concerning the European Union in its projections.
The OECD said that "significant risks remain" as further tit-for-tat tariffs between major global economies "would hit growth around the world and add to inflation".
However, one element that could ease the short-term pressure on the global economy is European nations' vows to boost defence spending in the face of the threat from Vladimir Putin's Russia and reluctance from Trump to continue Washington's bank-rolling of NATO.
An increase in defence spending could "support growth in the near-term, but potentially add to longer-term fiscal pressures", the OECD said.
With AFP
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