OECD upgrades growth outlooks for Türkiye, US, eurozone

The world economy has proven “surprisingly” durable in the face of adversity this year, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday, raising its growth estimates for some major economies, notably the U.S. and the eurozone, as well as Türkiye.

In its latest Economic Outlook, the 38-country OECD forecasts the world economy to grow 3.2% this year, down a tick from 3.3% in 2024, before slowing modestly to 2.9% in 2026, leaving its forecasts untouched from its last estimates in September. It predicted a rebound to 3.1% in 2027.

The gradual implementation of new trade policy barriers, political uncertainty and declining investment had put the brakes on growth, but demand had held up astonishingly well, the organization, which does economic research and promotes international trade and prosperity, said.

Easier global financial conditions, supportive macroeconomic policies, real income growth, and strong demand for new AI-related investments, particularly in the U.S., were supporting demand, it noted.

The U.S. gross domestic product (GDP) growth is now estimated at 2% in 2025, revised up from 1.8% in September, before slowing to 1.7% in 2026 – up from 1.5% predicted in September.

Still, even with the upgrade, the American economy – the world’s largest – would have grown considerably more slowly than it did in 2024 (2.8%).

Since returning to the White House in January, President Donald Trump has overhauled U.S. trade policy, imposing taxes on imports to build a protectionist wall around the previously open American economy.

Outlook ‘remains fragile’

The trade barriers were widely expected to slow growth and push up costs. But Trump’s tariffs have come in lower than the ones he threatened to impose in the spring. Many companies beat the levies by importing foreign goods into the United States before they took effect. And the U.S. and world economies are getting a boost from massive investments in artificial intelligence.

“The global economy has been resilient this year, despite concerns about a sharper slowdown in the wake of higher trade barriers and significant policy uncertainty,” OECD Secretary-General Mathias Cormann wrote in a commentary accompanying the forecasts.

Still, he added: “We expect higher tariffs to gradually feed through to higher prices, reducing growth in household consumption and business investment.”

The OECD says global growth is expected to recover through 2026, helped by the fading impact of higher tariff rates, favourable financial conditions, supportive macroeconomic policies and lower inflation, with emerging-market economies in Asia continuing to account for the majority of global growth.

But there are downside risks, as the outlook “remains fragile,” it cautioned.

“A further rise in trade barriers, especially around critical inputs, could inflict significant damage on supply chains and global output,” the organization said.

“High asset valuations based on optimistic expectations of AI-driven corporate earnings pose a risk of potentially abrupt price corrections,” it said, also warning that fiscal vulnerabilities may push long-term sovereign yields higher, tightening financial conditions and hampering growth.

Upgrade for eurozone, China

For the eurozone, the OECD now forecasts 1.3% growth, 0.1 percentage points more than in September, supported by resilient labor markets and increased public spending in Germany.

Growth is expected to moderate to 1.2% in 2026 – it was seen at 1% previously – as budget tightening in France and Italy weighs on the outlook.

China’s growth is expected to hold steady at 5% in 2025, up from 4.9% in September, before slowing to 4.4% in 2026 – unchanged from September – as fiscal support fades and new U.S. tariffs on goods imported from China bite.

Japan’s economy is projected to grow 1.3% in 2025, up from 1.1%, and buoyed by strong corporate earnings and investment, before slowing to 0.9% in 2026.

India, which has supplanted China as the world’s fastest-growing major economy, is expected to generate 6.7% growth this year, up from 6.5% in 2024.

Growth, inflation in Türkiye

In Türkiye, the OECD expects a 3.6% GDP growth this year, an upgrade from the 3.2% estimate in September. Next year, the growth is seen at 3.4%, compared to the earlier forecast of 3.2%.

The economy is expected to gain pace and expand by a stronger 4% in 2027, according to the organization.

Still, the OECD flagged ongoing price pressures. It expects Türkiye’s inflation to decline gradually, easing to around 10% by the end of 2027, but warned that risks remain tilted to the upside.

The organization revised Türkiye’s 2025 headline inflation forecast to 34.5% from 33.5%, and raised its 2026 inflation projection to 20.8% from 19.2%. For 2027, headline inflation is expected to slow to 11.7%.

Annual inflation has dipped to around 33% as of October from as high as 75% in May last year.

The report says the disinflation trend will allow for more than 20 percentage points of interest-rate cuts over the next two years, but stresses that tight monetary conditions should be preserved until inflation declines on a lasting basis.

In December last year, the Central Bank of the Republic of Türkiye (CBRT) started cutting interest rates after having kept the main policy rate steady for eight months. Since July, the central bank has cut its key policy rate by 650 basis points to 39.5%, but recent price pressures prompted it to slow its easing cycle.

The OECD sees CBRT’s one-week repo rate falling to 25% by the end of next year and to 17% by the end of 2027. Real rates, however, are expected to stay positive and high, keeping monetary policy restrictive.

On fiscal policy, the OECD expects Türkiye’s budget deficit to narrow from 3.1% of GDP in 2025 to 2.8% in 2027.

It said the 15% U.S. tariff on imports from Türkiye introduced in August is likely to have only a limited effect, but cautioned that slowing demand from Europe could pose a more significant challenge for exports.

Global trade, inflation outlook

The OECD said global trade growth is expected to moderate from 4.2% in 2025 to 2.3% in 2026 as the full effects of tariffs weigh on investment and consumption. Elevated trade policy uncertainty limits prospects for a recovery.

Inflation is projected to gradually return to central bank targets by mid-2027 in most major economies. In the U.S., inflation is expected to peak in mid-2026 due to tariff pass-through before easing. In China and some emerging markets, inflation is projected to rise modestly as excess production capacity declines.

Most major central banks are expected to maintain or lower borrowing costs over the coming year as inflation pressures ease. The Federal Reserve (Fed) is projected to cut rates slightly by the end of 2026, barring inflation surprises from tariffs.