The Paris-based Organization for Economic Co-operation and Development (OECD) emphasized in its latest economic outlook report that the rise in energy prices and the uncertain course of the conflict in the Middle East will increase costs and, in turn, suppress demand. According to the institution, this will largely balance the supportive effect created by positive factors such as technology investments and increase in production.
The most striking change occurred in inflation expectations. OECD predicts that annual inflation in the USA will reach 4.2 percent this year. This rate means an increase of 1.2 points compared to the institution’s estimate in December. A similar picture also applies to G20 countries. While inflation is expected to rise to 4 percent on a global scale, this indicates a significant upward revision compared to previous estimates.
Despite this, the OECD thinks that inflation will decline again in the medium term. According to the institution, inflation in the USA may drop to 1.6 percent by 2027. In G20 countries, inflation is expected to decline more slowly and stabilize around 2.7 percent. However, experts point out that this process may take longer than expected, especially due to the volatility in energy prices.
On the growth side, the picture is more cautious. OECD predicts that the global economy will grow by 2.9 percent in 2026. This rate indicates a significant slowdown compared to the previous year’s growth of 3.3 percent. The US economy is expected to remain relatively stronger. While the growth forecast for 2026 is announced as 2 percent, this rate is expected to decrease to 1.7 percent in 2027.
The report clearly emphasizes that the biggest risk in the short term is energy prices. It is stated that possible interruptions in energy exports from the Middle East could push oil and gas prices even higher, which could both increase inflation and further suppress economic growth. OECD economists warn that such a scenario could create a new shock wave in global markets.
On the other hand, a more positive scenario is also on the table. It is stated that the global economy can exhibit a more resilient performance if the conflict lasts shorter than expected, energy prices stabilize by the middle of the year, and technologies such as artificial intelligence increase efficiency.
All these developments point to a difficult period for central banks. Rising inflation again may cause interest rate cuts to be postponed or new interest rate increases to be brought to the agenda. Moreover, these decisions will have to be taken in an environment where growth slows down. Economists are of the opinion that uncertainty will continue to increase in terms of both monetary policy and global trade in the coming period.
