The global economy is expected to show greater resilience than anticipated in the face of disruptions linked to the war in the Middle East, with its impacts being offset by public support measures aimed at cushioning the effects of soaring energy prices and by dynamic investment in the artificial intelligence sector, according to the OECD.
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OECD upgrades global economic growth forecast to 2.9% for 2026
The Organisation for Economic Co-operation and Development has slightly upgraded its global economic growth forecast to 2.9% for 2026, despite the ongoing war in the Middle East, while cautioning that significant uncertainty continues to surround the global economic outlook.
Despite the upward revision of 0.1 percentage points compared to the forecast the OECD issued in June, growth is expected to slow this year following a 3.4% expansion in 2025, according to the organisation’s quarterly report on the global economy. The OECD attributes the slowdown to higher energy costs and rising prices eroding purchasing power.
“Global economic growth has slowed but remained resilient,” the OECD states in its report. It cites as contributing factors to this resilience “government support measures, partial substitution with alternative raw materials, increased supply from Gulf economies and the release of oil reserves,” as well as “the continued dynamism of artificial intelligence (AI)-related activities.”
Growth projected to reach 3% in 2027
Growth is expected to begin recovering, reaching 3% in 2027 — down 0.1 percentage points from the previous forecast — supported by a gradual easing of energy prices and inflation, driven by interest rate hikes from major central banks, including the European Central Bank in the Eurozone and the United States Federal Reserve.
Nevertheless, the OECD remains cautious, as global prospects continue to hinge on the trajectory of the war launched by the United States and Israel against Iran in February, which is disrupting the transportation of oil and natural gas.
Surging sovereign bond yields across multiple countries are fuelling uncertainty and leaving their fiscal positions increasingly vulnerable, the OECD warns.
“Further monetary policy adjustments may be necessary if signs of broadening price pressures emerge or if growth prospects deteriorate significantly,” the OECD cautions. While interest rate increases help combat inflation, they can also weigh on growth by dampening consumption and investment.
The war disrupts oil and natural gas flows
The organisation is guarded against any excessive optimism: global economic prospects remain closely tied to how the US-Israeli war in the Middle East unfolds. The conflict is disrupting the flow of oil and natural gas, primarily due to the blockade of the Strait of Hormuz — a strategically vital chokepoint for hydrocarbon transport. Fluctuating US tariffs (with an estimated effective rate of 10.9% as of mid-September) and soaring sovereign bond yields in numerous countries are adding to the uncertainty.
At their highest levels in 15 years, long-term government borrowing rates are leaving the fiscal positions of many states increasingly exposed. This has led the OECD to once again recommend targeted, time-limited government support measures in response to rising energy prices, alongside tighter control over public spending. Extreme weather events, following the devastating heatwaves of the summer, are identified as potential shocks to the global economy. The El Niño weather phenomenon — shaping up to be the strongest ever recorded — is expected to peak toward the end of the year, with its effects extending through to 2027. The OECD warns that it will hit agricultural production and intensify price pressures on food products.
