The Organisation for Economic Co-operation and Development (OECD) on Wednesday warned that the global economy is set for a significant slowdown this year which could become much more severe if the conflict in the Middle East drags on into 2027.
Prolonged risks
If the conflict proves short-lived, Gulf oil and gas production could gradually return to pre-crisis levels starting in the third quarter, with shortages confined to Asia and cushioned by strategic reserves and shipments from other producers. In that scenario, global growth is projected to slow from 3.4% in 2025 to 2.8% in 2026 before picking up to 3.1% in 2027, broadly in line with the OECD's March forecasts.
"The longer the disruption lasts, the greater the economic and social cost of this crisis,” said the OECD. If energy disruption persists well into next year, global growth could slow sharply to 2.1% in 2026 and 1.8% in 2027 – rates rarely seen outside major crises such as the 2008 financial crash or the COVID pandemic.
The OECD noted that higher prices for energy, fertilizers, and petroleum-related products would place heavy pressure on emerging economies, where household spending on energy and food accounts for a large share of consumption.
GDP growth in the United States is projected to be 2% in 2026 before slowing to 1.8% in 2027. In the eurozone, growth is projected to remain at 0.8% in 2026, much lower than last year’s 1.4%.
"The Asian economies will be particularly affected, especially in the prolonged disruption scenario. They are more exposed to, basically, energy products from the Gulf region. You can see that there is a significant further deceleration in economic growth. This is the difference with respect to the time-limited disruption scenario," OECD Chief Economist Stefano Scarpetta said.
The OECD also highlighted global inflation risk, forecasting that inflation will rise an additional 0.4 percentage points this year and 1.3 percentage points by 2027.
The OECD’s latest economic outlook reinforces recent assessments by major international organizations such as the International Monetary Fund (IMF), the World Bank (WB), and the United Nations (UN), all of which have warned that the prolonged Middle East conflict is undermining global growth prospects.
At the IMF and WB Spring Meetings in mid-April, the IMF lowered its global growth forecast to 3.1% this year, down 0.2 percentage points from its January forecast. In the worst-case scenario, in which oil and natural gas prices remain high through 2027, global economic growth would slow to 2%, meaning the world economy would come “close to recession.”
Technology as a stabilizing pillar
However, the OECD believes there are “anchors” that could help the global economy rebound sooner. One is investment in technology, particularly artificial intelligence. According to OECD Chief Economist Stefano Scarpetta, despite the risk of an “AI bubble,” this sector remains a major driver of growth.
"There is no sign of momentum fading. If we look at the plan investment by major AI companies, both for 2026 and for 2027, this is expected to almost double the level of 2025. So, these are significant strong investments in artificial intelligence. There is a lot of uncertainty, but the potential gains are also large," said Scarpetta.
Shantanu Mukherjee, head of the policy and analysis branch in the Sustainable Development Division in the UN's Department for Economic and Social Affairs, also has a less pessimistic view of the current global economic outlook.
"Though prospects are somber, there are concrete areas where international cooperation makes a difference. Countries face a renewed impetus for establishing resilience, whether these be through investing in renewable energy and energy efficiency, diversifying their economies, making targeted sectoral interventions, or improving mobilization and use of resources. All of these are shared priorities that the international system and the UN can help support," he said.
Mr. Mukherjee says the immediate priority for many economies is controlling inflation, as it has the most direct impact on households, particularly in developing countries, which are already struggling with price shocks caused by soaring energy costs and supply chain disruptions.
