Investing.com -- The global economy has demonstrated significant resilience in the past few years, despite facing major headwinds such as the Covid pandemic and the energy crisis.
However, the economic performance varies notably across different countries and regions, with some facing increasing risks related to rising trade tensions and protectionism, according to the Organization for Economic Cooperation and Development (OECD).
The OECD projects continued resilience with an expected global GDP growth rate of 3.3% in both 2025 and 2026, and inflation retreating to central bank targets.
“Despite some easing in labour markets, unemployment rates are still near historical lows in many countries. Global trade has also been recovering,” the OECD said in a recent report.
Still, the group warns of varying economic performances across different regions and countries. While the robust global performance masks these disparities, it is “surrounded by important downside risks and uncertainties,” the OECD cautions.
“More specifically, there are increasing risks related to rising trade tensions and protectionism, a possible escalation of geopolitical conflicts, and challenging fiscal policies in some countries,” it added.
Trade tensions and protectionism could disrupt supply chains, increase consumer prices, and negatively impact growth, according to the report. Similarly, geopolitical conflicts pose a threat to trade and energy markets, potentially leading to higher energy prices.
Another significant risk comes from the public finance sector, where public debt remains high. Emerging market economies and low-income countries are particularly vulnerable, with some already in debt distress or at high risk.
“Many other countries face mounting fiscal challenges and high debt. Increasing pressures from rising expenditures on defence, ageing populations, and the green and energy transition amplify these challenges,” the OECD writes.
“As a result, fiscal positions are strained and may jeopardise governments’ ability to respond to future crises.”
The report emphasizes the critical role of policy in managing risks and unlocking prospects for stronger, resilient, and sustainable growth. It calls for concerted action across monetary, fiscal, and structural policies.
As inflation pressures diminish, central banks must continue easing monetary policy cautiously, with a focus on containing inflation to mitigate risks to growth and real incomes.
At the same time, governments are urged to establish credible strategies for fiscal prudence, balancing the need to reduce fiscal pressures with preserving economic growth.
Structural reforms, particularly in addressing labor and skill shortages, are also vital.
The OECD points out that sectors like health, long-term care, and information technology are especially affected by these shortages, which can hinder businesses from scaling and capitalizing on productivity-enhancing innovations.
“In sum, even though the global economy is expected to remain resilient, risks and uncertainties are high,” the OECD said.
In such an environment, strong policy measures, bold structural reforms, and continued multilateral cooperation are key for mitigating risks and supporting global efforts to boost growth and improve living standards.