AI-led investment is helping the global economy hold up marginally better than expected this year, but the energy shock is becoming more entrenched, weighing on the outlook for 2027, the OECD said on Wednesday.
After 3.4-per-cent growth last year, the global economy is set to slow to 2.9-per-cent growth in 2026, slightly better than the 2.8 per cent forecast in June, the Organization for Economic Co-operation and Development said in its interim economic outlook.
Heading into 2027, the commodity price shock caused by the Middle East conflict is expected to weigh on momentum and the OECD forecasts global growth picking up to only 3.0 per cent, from 3.1 per cent in June.
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The OECD said strong spending on AI infrastructure, from data centres to semiconductors, has been a key pillar of resilience this year, boosting growth in the United States and lifting technology exports from Japan and Korea.
However, it warned the global outlook was particularly clouded by the potential for energy market jitters, extreme weather related to a strong El Niño, surging government bond yields and disappointing AI investment returns.
If those risks materialized, the OECD estimated they could together reduce global growth by 0.7 percentage points next year and raise global inflation by 1.1 percentage points.
In the OECD’s baseline outlook, inflation in G20 economies was seen at 4.1 per cent in 2026, up from 4.0 per cent forecast in June. The OECD also raised its 2027 forecast to 3.6 per cent, from 3.1 per cent in June, which it said could force central banks to adjust interest rates if price pressures broaden out or growth falters.
Divergent outlooks
In the U.S., the world’s largest economy, growth is seen at 2.2 per cent this year and 2.1 per cent in 2027, both upgrades from June, as heavy AI-related investment offsets weaker consumer spending. U.S. inflation is projected to hit 3.6 per cent in 2026, easing to 2.6 per cent in 2027 with tariffs and higher energy prices weighing on household purchasing power and business costs.
China’s growth is expected to slow to 4.5 per cent this year and 4.2 per cent in 2027, unchanged from June, as Beijing’s curbs on excess industrial capacity weigh on investment even as consumption faces a gradual pick up in inflation.
Euro zone growth is seen holding at 1.0 per cent in both 2026 and 2027, with higher energy prices and interest rates weighing on activity before new defence spending initiatives provide support.
Euro zone inflation is forecast at 3.0 per cent this year and 2.9 per cent in 2027, driven partly by a jump in natural gas prices as European storage levels sit at 15-year lows heading into the winter heating period.
Japan’s economy is expected to grow 0.8 per cent in 2026 and 0.7 per cent in 2027, with rising policy rates and costlier energy imports offsetting strong business investment. Unlike other major economies, Japan’s inflation is seen accelerating to 2.6 per cent in 2027 from 1.8 per cent this year, reflecting a tight labour market and strong wage growth.
Canada’s 2026 growth forecast was cut to 0.9 per cent from 1.2 per cent in June while its 2027 outlook was lowered to 1.3 per cent from 1.7 per cent due to the new U.S. tariffs on Canadian exports.