According to the OECD’s current forecast, rising energy prices due to the war in the Middle East are endangering the upswing in Germany. Growth will therefore only increase by 0.7 percent this year, 0.1 percentage points less than forecast in the previous economic outlook at the end of March, the Organization for Economic Cooperation and Development (OECD) announced in Paris. Growth of only 1.1 percent is expected for 2027, 0.4 percentage points less than in March. Higher energy prices are also likely to cause inflation to rise further.
A longer duration or further escalation of the Middle East conflict would lead to further rising energy prices and higher inflation, which would put a strain on consumption and investment, the OECD warned. A further escalation of trade tensions would also weigh on economic growth, as German industry is heavily integrated into global supply chains.
Global growth is weakening
Global growth will weaken from 3.4 percent last year to 2.8 percent this year before recovering to 3.1 percent in 2027, the OECD forecast. However, the longer the conflict in the Middle East lasts, the higher the economic and social costs will be. If the conflict lasts well into 2027, global growth is likely to slow significantly – to just 2.1 percent in the current year and 1.8 percent in 2027.
For the USA, the OECD predicts growth of around two percent for the current year, which will slow to 1.8 percent in 2027. While the energy shock and increased uncertainty due to the escalating conflict in the Middle East are expected to dampen private consumption growth, underlying growth will continue to be supported by strong investment in artificial intelligence.
In the euro area, the OECD expects growth of 0.8 percent for the current year, rising again to 1.2 percent in 2027 as domestic demand and trade growth pick up. According to the OECD forecast, growth in China will slow to 4.5 percent in 2026 and to 4.3 percent in 2027. China’s high energy consumption and dependence on imports made the country vulnerable to global oil price increases, but increasing use of renewable energy and abundant reserves mitigated these impacts.