Friday Mar 27, 2026
Friday Mar 27, 2026
Friday, 27 March 2026 04:44 - - {{hitsCtrl.values.hits}}
Global economic growth is expected to slow as higher energy costs linked to the Middle East conflict feed through to inflation and demand, according to the Organisation for Economic Co-operation and Development (OECD) Economic Outlook Interim Report released in March 2026.
The OECD projects global GDP growth at 2.9% in 2026 and 3% in 2027, with rising energy and fertiliser prices offsetting support from technology investment, lower tariff assumptions, and policy measures.
An earlier upward revision of around 0.3 percentage points to 2026 growth projections has been fully reversed following the escalation of the conflict in the Middle East.
The report also points to a marked increase in inflation pressures. G20 headline inflation is now projected to rise from 3.4% in 2025 to 4% in 2026 before easing to 2.7% in 2027, reflecting higher global energy prices.
Energy markets have shifted significantly from earlier assumptions. Brent crude oil and European gas prices are expected to be around 40% and 60% higher, respectively, in 2026 than projected in December 2025, contributing to near-term price pressures.
The impact is expected to vary across economies. Net energy exporters are likely to benefit from improved terms of trade, while import-dependent economies face weaker growth and higher inflation, particularly where energy inventories are limited.
Growth in advanced economies is projected to soften in the near term. In the US, GDP growth is expected to ease from 2% in 2026 to 1.7% in 2027, as consumer spending slows amid declining purchasing power and weaker labour force growth.
In the euro area, growth is projected to slow to 0.8% in 2026 from 1.4% in 2025 before recovering to 1.2% in 2027, with higher energy costs weighing on activity. Growth in the UK is also expected to remain subdued in the near term, while Japan’s expansion is forecast to ease to 0.9% in both 2026 and 2027.
Among emerging economies, growth is expected to moderate, driven by slower expansion in China and India. China’s growth is projected to ease to 4.4% in 2026 and 4.3% in 2027, while India’s growth is expected to slow as fiscal support fades and energy costs rise.
Inflation pressures are also expected to remain elevated across emerging markets, with headline inflation projected to increase to 4.4% in 2026 before easing in 2027.
The OECD said the energy shock is expected to become a more significant drag on growth through 2026, with higher costs weighing on demand even as inflation pressures remain elevated in the near term.
