The economic growth rate of the United States and Europe will slow down

The Organization for Economic Cooperation and Development (OECD) recently released its latest economic outlook report, which shows that before the outbreak of the US Israel Iran conflict, the global economic growth momentum was good. But the outbreak and continuation of the war not only brought huge losses of personnel and economy to the relevant countries, but also tested the resilience of the global economy. The report predicts that if the current chaos in the energy market can be alleviated, international oil, gas, and fertilizer prices will begin to fall in mid-2026. The global gross domestic product (GDP) growth rate is expected to remain stable at 2.9% in 2026, and the GDP growth rate is expected to reach 3.0% in 2027, a slight decrease of 0.1 percentage points from previous expectations.

Due to the gradual offsetting of investment growth in artificial intelligence (AI) by real income growth and slowing consumer spending, the report predicts that the US economic growth rate will slow down from 2.0% in 2026 to 1.7% in 2027. Due to the rise in energy prices suppressing economic activity, the Eurozone's economic growth rate is expected to slow down to 0.8% in 2026. Subsequently, thanks to a significant increase in defense spending, the economic growth rate is expected to rise to 1.2% in 2027. In the next two years, Japan's GDP growth rate will fall back to 0.9%, while India's economic growth rates will be 6.1% and 6.4% respectively.

The report predicts that rising energy prices will prolong the global inflation cycle. Affected by the soaring global energy prices, the average inflation rate of G20 members in 2026 is 1.2 percentage points higher than previously expected, reaching 4.0%. If energy price pressure can gradually subside in 2027, inflation will slow down to 2.7%. The core inflation rate of G20 developed economies is expected to decrease from 2.6% in 2026 to 2.3% in 2027. The report shows that the inflation rate of several major economies such as Brazil, Mexico, Türkiye, the United Kingdom and the United States is still higher than the target level when energy prices rise and supply chain disruptions occur. It is expected that the inflation rate in the United States will rise to 4.2% by 2026, and if major economic indicators return to normal, it is expected to fall back to 1.6% by 2027. In the next two years, Japan's inflation rates will be 2.4% and 1.9% respectively, while China's inflation rates will be 1.3% and 1.1%.

The report predicts that if energy prices continue to soar, it will have a significant impact on growth and inflation. According to the data analysis model of the OECD, if transportation in the Strait of Hormuz is interrupted for a long time or oil and gas facilities continue to shut down, global oil and gas prices will remain high after rising by about 25% in the first year. With the tightening of the global financial environment, global real GDP may decrease by about 0.3 percentage points in the first year and further decrease by 0.5 percentage points in the second year; The Consumer Price Index is expected to increase by approximately 0.7 percentage points in the first year and continue to rise by approximately 0.9 percentage points in the second year.

The report suggests that the current global economic outlook is highly uncertain. The major downside risk lies in the disruption of transportation in the Strait of Hormuz, the closure or damage of some energy infrastructure, resulting in soaring energy prices and disrupting the supply of important commodities such as energy and fertilizers globally, driving up production and trade costs for businesses and suppressing global consumer demand. More importantly, there is still significant uncertainty regarding the scope and duration of the conflict, which could cause global energy prices to rise beyond expectations, exacerbate shortages of key commodities, push up inflation, and suppress growth. If the huge investment return of the artificial intelligence industry, one of the important engines of the current world economic growth, is lower than expected, and the "foam" of the artificial intelligence industry is broken, it may lead to increased volatility in the international financial market, more countries' policy environment is tightened, or it will further weaken demand and increase financial stability risks.

At the same time, the report also points out that from the perspective of the upward factors supporting the economy, global technology related investment and production continue to maintain strong growth, while global tariff rates are lower than previously expected, especially after the US Supreme Court ruled that the tariffs imposed by the US government under the International Emergency Economic Powers Act are invalid, the bilateral tariff rates on US foreign trade have decreased, with particularly significant reductions in tariffs on emerging market economies such as Brazil and India. Whether in developed economies or emerging market economies, the financial environment in most countries remains mild and loose. If the corporate sector demonstrates astonishing resilience and the war ends earlier than expected to alleviate energy price pressures, or if massive investments in artificial intelligence bring about a substantial increase in productivity, it may drive global economic growth higher.

The report concludes by calling on governments around the world to prioritize improving energy efficiency and reducing dependence on fossil fuel imports in the face of energy price shocks, and to establish clear mechanisms. For countries with tight finances, it is necessary to ensure debt sustainability and release resources to address long-term expenditure challenges. Central banks and financial regulatory agencies of various countries should remain vigilant and closely monitor changes in inflation. If price pressures expand or growth prospects significantly weaken, monetary policies should be adjusted in a timely manner, and prudent regulatory policies should be implemented simultaneously to cope with financial risks.