The global economy is proving more resilient than many anticipated, according to the OECD's latest interim outlook published on Wednesday. The Paris-based organisation nudged up its 2026 world growth forecast by 0.1 percentage point to 2.9%, concluding that the world has "weathered the energy supply shock triggered by the conflict in the Middle East better than expected."
That still marks a clear slowdown from the 3.4% expansion recorded last year, and the OECD also trimmed its 2027 projection by 0.1 point to 3%. The upward revision for 2026 was broad-based, with the United States now seen growing 2.2% and the eurozone 1%, both up 0.2 points. Japan's forecast rose by the same margin to 0.8%, while China was left unchanged at 4.5%. The G20 as a whole is expected to expand 3.1%.
Europe's mixed picture
Within the eurozone, the OECD expects Spain to remain the standout performer, with growth of 2.6% in 2026 and 1.8% in 2027, ahead of all other countries covered in the September update. Germany is forecast to grow by 1.1% in both years, Italy by 0.9% and 0.6%, and France by 0.4% and 0.7%, respectively. The eurozone as a whole is projected to grow by 1% in each year.
The resilience comes despite a sharp spike in energy prices following the US and Israeli strikes on Iran in February. The OECD attributes the better-than-expected performance to sizeable oil inventories, additional supply from producers outside the Gulf, and discretionary government support measures. Broader financial conditions, including rising stock markets and continued access to credit, have also remained supportive.
Heavy investment in artificial intelligence has bolstered production and trade, and the organisation said it could yet deliver stronger growth than projected. However, the relief comes with significant caveats.
Inflation and bond yields cloud the outlook
Central banks have begun raising interest rates to contain inflation driven by high oil and gas prices, which have pushed diesel and other fuel costs to multi-year highs. Headline inflation in G20 countries is projected at 4.1% this year, while the OECD expects it to reach 3% in the eurozone.
Meanwhile, government bond yields in EU countries including Germany and France have climbed to multi-year highs, raising borrowing costs for governments already carrying heavy debts and deficits. In Europe, these higher borrowing costs, alongside targeted, temporary energy support, are putting further strain on public finances.
The OECD warned that "rising bond yields underline more than ever the need for enhanced efforts to contain and reallocate government spending, improve public-sector efficiency and strengthen revenues to ensure longer-term debt sustainability and maintain the ability of governments to react to significant shocks."
The organisation also flagged a prolonged war, weather-related supply shocks from a very strong El Niño hitting harvests and food prices, and AI investment returns that could disappoint as key risks that could weaken growth.
For European policymakers, the report underscores the delicate balancing act between supporting households and businesses through the energy crisis and maintaining fiscal credibility. As Brussels holds its line on Arctic drilling and debates energy security, the OECD's findings suggest that the continent's immediate economic challenges are manageable, but longer-term vulnerabilities remain.
The OECD's upgraded outlook offers some relief, but the path ahead is far from smooth. With inflation still above targets and borrowing costs rising, governments across Europe will need to tread carefully to sustain growth without exacerbating debt burdens.
