OECD Revises Up Global Growth: US & Emerging Economies Outperform Expectations

Report points to stronger 2025 outlook despite tariff headwinds and policy uncertainty

The Organisation for Economic Co-operation and Development (OECD) has revised up its forecast for global GDP growth in 2025 to around 3.2%, up from 2.9%, citing stronger pedestrian momentum in emerging markets, resilient trade flows, and what it calls “front-loaded export activity” ahead of U.S. tariffs. The U.S. growth forecast has also been nudged upward to approximately 1.8% for 2025. However, growth is expected to cool in 2026.

Key Upside Drivers

• Tariff anticipation & export front-loading: Firms in several economies exported earlier than otherwise expected to beat new U.S. import tariffs, temporarily boosting trade volumes.
• Strong performances in emerging markets: Asia and other emerging regions outperformed modest projections thanks to robust domestic demand and increased investment.
• Policy support & Fed easing expectations: Central banks are seen maintaining accommodative monetary policies, with rate cuts expected in advanced economies like the U.S., UK, Canada, and Australia. Fiscal measures in some countries have also acted as buffers.

What’s Holding Growth Back

• The full impact of high U.S. tariffs and trade barriers has yet to be felt; lagging effects may drag on merchandise trade and corporate supply chains.
• Emerging signs of slowing in labour markets in advanced economies, tightness is easing, which may reduce consumption and weigh on output.
• Inflation remains above targets in several major economies, risking tighter policy or delayed monetary easing.

Investor & Market Implications

• Risk assets & equities: The upgraded forecasts may support equity markets, especially in emerging and export-oriented economies. Investors are likely to favour countries that avoid tariff exposure and maintain stable macro policy.
• Bond & yield curve dynamics: With expectations for rate cuts, long yields may come under pressure, although inflation surprises could reverse that trend.
• Currency flows: Weaker dollar periods could support exporters; currencies in emerging markets may benefit if policy stability persists.
• Trade policy as macro risk: Tariff implementation, trade conflicts, and regulatory uncertainty remain key risk factors for forecasts; firms are likely to price in those risks.

Risks & What to Watch

• Whether trade tensions escalate or U.S. imposes additional tariffs; delayed impact may show up as lower trade volumes in Q4-2025.
• Data from China, India, and other large emerging economies will be critical, particularly industrial output, exports, and consumer demand metrics.
• Fed and central banks’ communication: how aggressive any easing is, especially in the U.S. and Euro area.
• Inflation risks: energy prices, food prices, and supply chain disruptions could reignite inflation pressures.

In summary, the OECD’s upgraded global outlook reflects surprising resilience in many economies, helped by early exports and robust emerging-market momentum. But the shadow of U.S. tariff policy and inflation remains. The core theme: growth upside exists, but so does significant risk.