The OECD warned that further increases in trade barriers would dampen global growth and contribute to inflationary pressures.

PARIS, March 17 (Xinhua) -- Global GDP growth is projected to moderate from 3.2 percent in 2024 to 3.1 percent in 2025 and 3 percent in 2026, the Organization for Economic Cooperation and Development (OECD) said on Monday in its latest Economic Outlook.

The downward revision from its previous forecast reflects "higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending," the OECD noted.

The organization warned that further increases in trade barriers would dampen global growth and contribute to inflationary pressures. In its December 2024 forecast, the OECD had projected global GDP growth at 3.3 percent for both 2025 and 2026.

Economic growth is expected to slow in major economies. In the United States, GDP growth is projected to decline to 2.2 percent in 2025 and 1.6 percent in 2026 as tariff hikes take effect. In the euro area, GDP growth is forecast at 1 percent in 2025 and 1.2 percent in 2026, with heightened uncertainty keeping expansion subdued. Germany, France, and Italy are all expected to see economic growth below 1 percent in 2025, while Spain's economy is projected to expand by 2.6 percent in 2025 and 2.1 percent in 2026.

Inflation is expected to remain higher than previously anticipated, though still moderating as economic growth softens. In G20 economies, headline inflation is projected to decline from 3.8 percent in 2025 to 3.2 percent in 2026. In the euro area, inflation is forecast to drop from 2.3 percent in 2024 to 2.2 percent in 2025 and 2 percent in 2026. However, in the United States, inflation is expected to rise from 2.5 percent in 2024 to 2.8 percent in 2025.

Core inflation in more than half of the advanced G20 economies, including the United States, is projected to remain above central bank targets in 2025 and 2026.

The OECD cautioned that a resurgence of inflation or weaker-than-expected economic growth could lead to financial market volatility. It also warned that new bilateral tariff measures and rising policy and geopolitical uncertainty would weigh on business investment and trade, while increased trade costs could put further upward pressure on consumer prices.

To mitigate the negative effects of trade tariffs, the OECD urged central banks to remain vigilant in managing inflation risks and called for ambitious structural reforms to support economic growth. "Rising protectionism, geopolitical uncertainty and weak growth prospects all serve to reinforce the need for ambitious structural policy reforms that ensure healthy domestic markets," the OECD added.