Global economy faces slowdown as OECD cuts growth forecast

The Organisation for Economic Co-operation and Development (OECD) has warned that the war in the Middle East is weakening global economic growth prospects, with a sharper downturn possible if no effective ceasefire is reached before 2027, News.Az reports, citing AFP.

In its quarterly update released on Wednesday, the OECD said global growth is projected to fall to 2.8% in 2026 if Gulf oil and gas exports return to pre-conflict levels in the third quarter. Previously, it had forecast global growth of 2.9% for the year.

However, if the conflict continues into next year, global growth could slow significantly to 2.1%, the organisation said, well below the 3.4% average annual growth recorded between 2013 and 2019, before the COVID-19 pandemic.

“The longer the disruptions last, the larger the economic and social costs become,” said OECD chief economist Stefano Scarpetta.

He warned that many countries could face recession risk, while reduced investment spending—including in energy-intensive artificial intelligence—could drive unemployment higher.

The OECD also said sustained high prices for energy, fertiliser, and other key goods from Gulf hydrocarbon production would hit developing economies hardest, particularly those where food and energy account for a large share of household consumption.

Even if the war triggered by US and Israeli strikes on Iran in late February ends in the coming weeks, the OECD expects global inflation to rise to 4.0% this year, up from 3.4% in 2025.

Under this “time-limited disruption scenario,” US growth is projected to slow to 2.0% this year and 1.8% in 2027, compared with 2.1% last year.

In the eurozone, which is heavily dependent on energy imports, GDP growth is forecast to fall to 0.8% this year, down from 1.4% last year, assuming a ceasefire is secured in the coming weeks.

News.Az 

By Nijat Babayev