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OECD Economic Outlook Tackling Uncertainty, Reviving Growth

In the past few months, we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment. In this challenging and uncertain environment, we have downgraded our growth projections. We are now forecasting that global growth will decline from 3.3% in 2024 to a modest 2.9% in 2025 and in 2026. Weakened economic prospects will be felt around the world, with almost no exception. Lower growth and less trade will hit incomes and slow job growth. Although inflation has recently declined in most countries, service price inflation remains stubbornly sticky and goods price inflation has increased slightly in many countries due to rising food prices. Protectionism is adding to these inflationary pressures, and inflation expectations have risen substantially in several countries. And even though we are still forecasting that inflation will come down to central bank targets by 2026 in most countries, it will now take longer to reach those targets. In the countries more affected by tariffs, inflation might even rise first before coming down.

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