AI Drives Global Economy, OECD Raises Growth Forecast

The global economy is expected to grow somewhat stronger this year than previously anticipated, with a wave of activity in sectors related to artificial intelligence and a presumed milder rise in energy prices likely to extend the trend of slight acceleration through 2027, forecasts the Organisation for Economic Co-operation and Development (OECD).

The global economy is projected to grow by 2.9 percent this year, according to new OECD forecasts. In June, they had predicted a growth of 2.8 percent. The impact of rising oil prices has been milder than expected so far, partly due to alternative supply routes, stockpiling, and the release of strategic reserves in OECD countries, the report states.

The pressure has been alleviated by increased oil production outside the Persian Gulf and weaker demand, particularly in China, OECD experts note. Economic growth and trade continue to be supported by strong investments in artificial intelligence, they observe.

Investments in AI and the presumed milder rise in energy prices are expected to support the trend of slight acceleration in activity through 2027, with a projected growth rate of 3.0 percent. In June, the OECD had forecasted a global growth of 3.1 percent for the following year.

The forecast largely depends on the further development of the conflict in the Middle East, which remains difficult to predict, they note.

Spain at the Forefront

The American economy is expected to grow by 2.2 percent this year and slightly slow down next year to 2.1 percent. Strong investments in AI in the world’s largest economy will somewhat dampen the slowdown in personal consumption and modest growth in real income, OECD notes.

Activity in the Eurozone is expected to grow by one percent this year and next, according to new forecasts. At the beginning of summer, the OECD had predicted a growth of 0.8 percent for this year and 1.2 percent for the next. Demand in the area of the common European currency will strengthen when energy prices normalize and when ‘new defense initiatives’ gain momentum, they note.

Spain continues to lead the forecasted growth in activity among the Eurozone’s big four, with a projected growth of 2.6 percent this year and 1.8 percent next year. The German economy is expected to grow by 1.1 percent this year, somewhat stronger than the OECD had expected in June, with the same growth rate anticipated in 2027.

Italy follows with an expected growth of activity of 0.9 percent this year and 0.6 percent in 2027. The weakest growth this year is predicted for France, at 0.4 percent. In 2027, activity is expected to slightly accelerate, with a projected growth rate of 0.7 percent.

India Above ‘Seven’

India is expected to slightly exceed ‘seven’ this year, with an anticipated growth of activity of 7.1 percent. In June, the OECD had predicted that activity would grow by 6.3 percent. In 2027, activity is expected to noticeably slow down to 6.5 percent, according to new forecasts. The Chinese economy is expected to grow by 4.5 percent this year and only slightly slow down in 2027 to 4.2 percent.

Gradual strengthening of inflation is hindering consumption, and investments are expected to slow down due to government policies limiting excess capacity, according to the OECD. Indonesia is projected to surpass China with an anticipated growth of activity of 5.2 percent this year and 5.1 percent in 2027, according to OECD forecasts. The Russian economy is expected to grow by 0.5 percent this year and by 0.6 percent in 2027.