Trade tensions and geopolitical uncertainties are weighing on economic perspectives, the Organisation for Economic Co-operation and Development (OECD) said yesterday as it lowered its projections for global growth this year.
"We are navigating troubled waters," OECD chief economist Alvaro Santos Pereira said as he summed up the world’s economic situation in the coming months, with inflation set to rise.
US President Donald Trump’s return to the White House is in part responsible for the coming turbulence, the OECD said in its report, with his protectionist policies sparking trade wars and driving up inflation.
Photo: AFP
While global economic activity remained "resilient" last year with a 3.2 percent increase in GDP, the OECD trimmed back its projection for this year from 3.3 percent growth to 3.1 percent.
That was due to "higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending."
The Paris-based OECD’s projections were based primarily on weaker expected growth in the US and the eurozone.
US growth is expected to be 2.2 percent this year, down from the OECD’s 2.4 percent projection in December last year, before falling to 1.6 percent next year — a drop of 0.5 percentage points on the OECD’s previous forecast.
Likewise, the eurozone growth projection is down from 1.3 percent three months ago to just 1.0 percent, but will continue its upward trajectory from 0.7 percent last year, reaching 1.2 percent next year.
China, meanwhile, is expected to maintain healthy growth at 4.8 percent this year and 4.4 percent the following year.
But trade wars sparked by Trump’s protectionist policies are due to drive inflation "to be higher than previously expected" levels.
"Core inflation is now projected to remain above central bank targets in many countries in 2026, including the United States," the OECD said.
US inflation is now expected to accelerate to 2.8 percent this year, up 0.7 percentage points from the previous projection and above last year’s 2.5 percent. The OECD said its projections took into account new tariffs between the US and its neighbors Canada and Mexico, both of whom are likely to be heavily affected by Trump’s policies.
The OECD slashed its projection of Canada’s growth from 2.0 percent to just 0.7 percent, while it now forecasts a 1.3 percent contraction in Mexico’s economy having previously predicted 1.2 percent growth for this year.
The OECD also took into account new tariffs on trade between the US and China and those imposed on steel and aluminum, but not any threatened reciprocal levies nor any concerning the European Union.
"European economies will experience fewer direct economic effects from the tariff measures" than Canada and Mexico, the OECD said, "but heightened geopolitical and policy uncertainty is still likely to restrain growth".
For the second report in succession, the OECD has lowered its growth expectations for both France and Germany — down to 0.8 and 0.4 percent respectively.
Britain’s forecast is also down to just 1.4 percent, with only Spain amongst major European nations bucking the trend and set to maintain its recent strong performance with 2.6 percent growth predicted for this year.
The OECD said that "significant risks remain" as further tit-for-tat tariffs between major global economies "would hit growth around the world and add to inflation."
However, one element that could ease the short-term pressure on the global economy is European nations’ vows to boost defense spending in the face of the threat from Vladimir Putin’s Russia and reluctance from Trump to continue Washington’s bankrolling of NATO.
An increase in defense spending could "support growth in the near-term, but potentially add to longer-term fiscal pressures," the OECD said.
HORMUZ ISSUE: The US president said he expected crude prices to drop at the end of the war, which he called a ‘minor excursion’ that could continue ‘for a little while’ The United Arab Emirates (UAE) and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply. Abu Dhabi National Oil Co (ADNOC) is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp said it was lowering production at its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.” The war in the Middle East has all but closed Hormuz, the narrow waterway linking the Persian Gulf to the open seas,
Nanya Technology Corp (南亞科技) yesterday said the DRAM supply crunch could extend through 2028, as the artificial intelligence (AI) boom has led the world’s major memory makers to dramatically reduce production of standard DRAM and allocate a significant portion of their capacity for high-bandwidth memory (HBM) chips. The most severe supply constraints would stretch to the first half of next year due to “very limited” increases in new DRAM capacity worldwide, Nanya Technology president Lee Pei-ing (李培瑛) told a news briefing. The company plans to increase monthly 12-inch wafer capacity to 20,000 in the first half of 2028 after a
Taiwan has enough crude oil reserves for more than 100 days and sufficient natural gas reserves for more than 11 days, both above the regulatory safety requirement, Minister of Economic Affairs Kung Ming-hsin (龔明鑫) said yesterday, adding that the government would prioritize domestic price stability as conflicts in the Middle East continue. Overall, energy supply for this month is secure, and the government is continuing efforts to ensure sufficient supply for next month, Kung told reporters after meeting with representatives from business groups at the ministry in Taipei. The ministry has been holding daily cross-ministry meetings at the Executive Yuan to ensure
RATIONING: The proposal would give the Trump administration ample leverage to negotiate investments in the US as it decides how many chips to give each country US officials are debating a new regulatory framework for exporting artificial intelligence (AI) chips and are considering requiring foreign nations to invest in US AI data centers or security guarantees as a condition for granting exports of 200,000 chips or more, according to a document seen by Reuters. The rules are not yet final and could change. They would be the first attempt to regulate the flow of AI chips to US allies and partners since US President Donald Trump’s administration said it rescinded its predecessor’s so-called AI diffusion rules. Those rules sought to keep a significant amount of AI
RSS