OECD Forecasts Dual Global Economic Paths
The OECD forecasts two global economic paths based on the Middle East conflict's duration, impacting growth, inflation, and AI investment vulnerability.
Atlas Newsdesk ·
OECD Forecasts Dual Global Economic Paths
The Organisation for Economic Co-operation and Development (OECD) on Tuesday presented two divergent global economic outlooks, contingent on the duration of the Middle East conflict. The Paris-based group's latest economic projections indicate either a modest slowdown if the conflict de-escalates soon, or a severe economic downturn, potentially nearing recession for some economies, if the disruption persists.
Under the more optimistic scenario, global growth is projected at 2.8% for the current year, a slight decrease from the 2.9% forecast in March. However, a prolonged conflict extending into 2027 could reduce global growth to 2.1% in 2026 and 1.8% in 2027. This downside scenario would disproportionately affect economies reliant on Middle Eastern energy, particularly parts of Asia outside China, with Persian Gulf output experiencing an outright decline.
Inflation for G20 nations is forecast to reach 4% this year, easing to 3.1% by 2027. A protracted conflict would elevate these figures by an additional 0.4 percentage points this year and 1.3 points in 2027. The OECD also highlighted that while AI investment currently provides some economic offset, it simultaneously increases global economic vulnerability to energy markets, semiconductor supply chains, and critical industrial inputs, which are susceptible to geopolitical tensions.