Global economic growth to slow to 2.8% in 2026 amid Mideast tensions: OECD

04/06/2026 05:30 AST

Global economic growth is projected to slow from 3.4 percent in 2025 to 2.8 percent in 2026, before recovering to 3.1 percent in 2027, according to the latest Economic Outlook released by the Organisation for Economic Cooperation and Development (OECD) on Wednesday.

Even though the world economy entered 2026 stronger than many had anticipated, the conflict in the Middle East has become the dominant force shaping the global economic outlook, the OECD said.

According to the OECD, the evolution of the conflict remains uncertain, while its economic consequences are likely to be felt for some time even after its resolution.

Recognising this uncertainty, the organisation based its analysis on two possible trajectories: a time-limited disruption scenario, in which disruptions remain relatively short-lived, and a prolonged disruption scenario with broader and much more lasting negative consequences.

Under a baseline scenario in which prospects for a peace deal between the United States and Iran gain momentum and energy prices gradually ease from mid-2026 onward, the OECD projects global economic growth to slow from 3.4 percent in 2025 to 2.8 percent in 2026 before recovering to 3.1 percent in 2027.

The longer the disruptions persist, the OECD warned, the greater the economic and social costs would become. Should the disruptions extend well into 2027, global economic growth is projected to slow sharply to 2.1 percent in 2026 and 1.8 percent in 2027, potentially pushing some economies into or close to recession.

Under the prolonged disruption scenario, global inflation would rise by 0.4 percentage points in 2026 and 1.3 percentage points in 2027, with upward pressure from elevated commodity prices partially offset by weaker final demand, according to the OECD.

The OECD cautioned that policy responses should be carefully calibrated to avoid exacerbating strains in energy markets, which would add to inflationary pressures and undermine fiscal sustainability.

The OECD added that the vulnerability of economies to a single chokepoint demonstrates the need to intensify efforts to strengthen the resilience of supply chains, calling in particular for greater efforts to diversify energy supplies and improve energy efficiency.

Xinhua