OECD increases global GDP growth projection for 2026, lowers it for 2027
Global GDP growth is projected to be 2.9 per cent in 2026 and three per cent in 2027, the Organisation for Economic Cooperation and Development (OECD) said in its September interim report on the economic outlook.
The GDP growth projection for 2026 is higher than the 2.8 per cent in its previous Economic Outlook, but that for 2027 is down from the 3.1 per cent in its previous report.
Stronger price pressures, weaker real income growth and higher interest rates will moderate near-term growth momentum in many economies, but robust AI-related activity and an assumed easing of energy prices in line with futures markets next year will help activity strengthen through 2027, the OECD said.
More persistent disruptions to Middle East energy exports, or weather-related supply shocks, could weigh on global growth, the new report, released on September 23, said.
The path of oil and gas prices depends critically on the duration of supply disruptions, the extent to which producers and consumers can adjust, and geopolitical developments, the OECD said.
Higher energy and food prices would erode household purchasing power, while disruptions to oil and gas supply could take time to unwind even after a lasting resolution of the conflict. Growth prospects could also weaken if long-term sovereign bond yields rise further or if returns on AI-related investment fall short of expectations, potentially triggering a repricing of financial assets.
Thus far, wider economic impacts of shock from the conflict in the Middle East were cushioned by supply adjustments: rerouting of oil transports, additional energy supply from outside the Gulf, drawdowns of oil reserves and some switching to alternative commodity inputs, as well as widespread reintroduction of discretionary government support measures, the new report said.
A significant reduction in consumption helped balance the market, it said.
A renewed energy price shock in September is expected to keep inflation higher for longer, the report said.
G20 headline inflation is projected to rise to 4.1 per cent in 2026 before easing to 3.6 per cent in 2027. Core inflation in the advanced economies is anticipated to moderate from 2.7 per cent in 2026 to 2.5 per cent in 2027.
Long-term sovereign borrowing costs have risen further, with 30-year government bond yields remaining elevated to levels unseen in the past decade or two, the OECD said.
Higher long-term interest rates are raising borrowing costs for governments and weighing on equity valuations.
Planned capital expenditure by major technology and cloud-computing companies continues to rise rapidly. Current investment plans imply expectations of substantial future earnings, especially for semiconductor producers.
Rising energy prices are increasing pressure on governments to support households and businesses. While many past energy support measures have been phased out and are increasingly targeted, broad-based interventions remain common and can be costly. Any new support should be temporary, well targeted and designed to preserve incentives to reduce energy use, the report said.
(Illustration: Jhon Casso)
