The OECD kept the global economy on track to weather the fallout from the war in the Middle East, driven in particular by strong investments in artificial intelligence, but warned that the energy shock was becoming more entrenched, threatening to weaken growth and raise inflation over the next year.
In its interim economic update issued on Wednesday, the organization raised its expectations for global economic growth in 2026 to 2.9 percent, compared to 2.8 percent in June estimates, but it reduced its expectations for 2027 to 3 percent from 3.1 percent previously.
This comes after global growth of 3.4 percent last year, which means that the global economy is heading toward a clear slowdown despite its ability to absorb part of the energy shock resulting from the war.
The organization said that investments related to artificial intelligence - especially in data centers and semiconductors - have become one of the main pillars of the global economy's resilience this year, and have contributed to supporting American growth and enhancing technology exports from Japan and South Korea.
On the other hand, relatively high levels of oil stocks, increased supplies from outside the Gulf countries, and government support measures helped mitigate the impact of rising energy prices on the global economy.
Energy threatens 2027 growth
But the organization warned that the continued commodity shock resulting from the war in the Middle East will affect growth momentum during 2027, at a time when the risks of rising energy prices and reigniting inflation increase.
Oil and gas prices have risen to high levels since the outbreak of war, pushing diesel and fuel costs to levels not seen in markets for years, while central banks have begun raising interest rates again to confront inflationary pressures.
The organization believes that inflation in the G20 economies will reach 4.1 percent in 2026, up from 4 percent in June expectations, before reaching 3.6 percent in 2027, compared to 3.1 percent in previous estimates.
This means that the energy shock has become a more prominent factor in monetary policy calculations, and central banks may be forced to adjust the course of interest rates if price pressures expand or growth declines.
Artificial intelligence in the face of the oil shock
Despite the risks, the organization believes that the investment boom in artificial intelligence provides important support for economic activity. Spending on data centers and semiconductors supports the US economy, while Japan and South Korea benefit from increased technology exports.
But the organization warned that this force may not be sufficient if several shocks occur at the same time. Turbulence in energy markets, extreme weather linked to a strong El Niño, and rising government bond yields, coupled with disappointing investment returns in artificial intelligence, could reduce global growth by up to 0.7 percentage points next year, and raise global inflation by about 1.1 percentage points.
The organization also indicated that the rise in government bond yields to levels not recorded since the global financial crisis in 2007 and 2008 increases borrowing costs, at a time when governments face high levels of debt and deficits.
It called on governments to contain and redirect public spending, improve the efficiency of the public sector and enhance revenues, ensuring the sustainability of debt and the ability of governments to respond to major shocks.
Saudi Arabia: A rebound in 2027
In Saudi Arabia, the Organization for Economic Cooperation and Development expects the gross domestic product to contract by 1.8 percent in 2026, before the economy returns to growth at a rate of 4.1 percent in 2027.
The organization's forecasts indicate that inflation in the Kingdom will remain at relatively low levels, at 1.8 percent in 2026, before rising to a limited extent to 2.1 percent in 2027.
These expectations place the Saudi economy in a different context from economies facing greater inflationary pressures as a result of rising energy prices. The Kingdom's expected inflation rate during the two years remains low compared to inflation expectations in the G20 economies.
Variation between major economies
In the United States, the organization raised its growth forecast in 2026 to 2.2 percent, an increase of 0.2 percentage points from June estimates, and it also raised its forecast for 2027 to 2.1 percent. It believes that AI-related investment partly offsets weak consumer spending.
It expects US inflation to reach 3.6 percent this year, before declining to 2.6 percent in 2027, with the continued impact of customs duties and high energy prices on the purchasing power of families and corporate costs.
The organization maintained Chinese economic growth expectations at 4.5 percent in 2026 and 4.2 percent in 2027, with the continued impact of Beijing’s restrictions on surplus industrial production capacity on investment, in parallel with a gradual recovery in consumption.
In Britain, the organization raised its economic growth forecast to 1.1 percent in 2026, from 0.9 percent in June forecasts. But it lowered its estimate for 2027 to 1 percent, from 1.1 percent.
In the euro zone, the organization forecast growth of 1 percent in both 2026 and 2027, with higher energy and interest prices continuing to pressure activity, before increased defense spending provides support to the economy.
Inflation in the region is expected to reach 3 percent this year and 2.9 percent in 2027, driven in part by rising gas prices, with European gas stocks reaching their lowest levels in 15 years as the heating season approaches.
As for Japan, the organization expects its economy to grow by 0.8 percent in 2026 and 0.7 percent in 2027, with the rise in private investment partially compensating for the impact of rising interest rates and energy import costs. It believes that Japanese inflation will rise to 2.6 percent in 2027 from 1.8 percent this year.
In Turkey, the organization raised its inflation expectations to 31.5 percent in 2026, from 28.4 percent in June forecasts, and to 24.7 percent in 2027, from 18.3 percent, while it lowered its growth expectations to 2.7 percent and 3.6 percent, respectively.
In Canada, the organization reduced its growth expectations in 2026 to 0.9 percent from 1.2 percent, and for 2027 to 1.3 percent from 1.7 percent, affected by new US tariffs on Canadian exports.
