OECD warns of protectionism risk to global growth outlook

By Leigh Thomas

PARIS (Reuters) - The world economy is set for steady growth in the next two years if resurgent protectionism does not derail a recovery in global trade, the Organisation for Economic Cooperation and Development said on Wednesday.

The world economy is poised to grow 3.2% this year and 3.3% in 2025 and 2026 as lower inflation, job growth and interest rate cuts help offset fiscal tightening in some countries, the OECD said in its latest Economic Outlook.

Its latest forecasts were largely in line with its last review dating from September, when it had expected growth of 3.2% this and next year and did not yet have a forecast for 2026.

After global trade sputtered last year, it is rebounding and growth in volumes is set to reach 3.6% next year despite a growing number of measures to restrict the flow of imports, the OECD said.

"Rising trade tensions and further moves towards protectionism might disrupt supply chains, raise consumer prices, and negatively impact growth," the OECD said.

The outlook for global trade has become clouded since U.S. President-elect Donald Trump has stepped up calls for tariff hikes on various major trade partners.

As a cooling job market causes consumer spending to moderate, the OECD forecast that U.S. growth would ease from 2.8% this year to 2.4% in 2025 and 2.1% in 2026.

In China, the world's second-biggest economy, growth was seen easing from 4.9% in 2024 to 4.7% in 2025 and 4.4% in 2026 despite monetary and fiscal easing as consumers spending remains sluggish due to high rainy-day savings.

Meanwhile, in the euro zone, investment would benefit from central bank easing and tight labour markets would support consumer spending, pushing growth up from 0.8% this year to 1.3% in 2025 and 1.5% in 2026.

UK growth was seen picking up from 0.9% this year to 1.7% in 2025 as real income gains and a hike in public spending helped offset the effect of higher taxes, before growth eases back to 1.3% in 2026.

Boosted by economic stimulus measures, Japan was seen rebounding from a 0.3% contraction this year to growth of 1.5% in 2025 before moderating to 0.6% in 2026.

As inflation eases, most major central banks should keep carefully loosening monetary policy with the exception of Japan, the OECD said.

With most governments' public finances under strain, the OECD said they needed to take decisive action to stabilise their debt burdens.

(Reporting by Leigh Thomas; Editing by Mark Potter)