The world economy is turning the corner toward a brighter future, according to the OECD. In the latest interim update to its Economic Outlook, the Paris-based organisation says global activity was resilient in the first half of 2024 and should now stabilise at current levels. Headline inflation is moving towards target in most G20 countries, helping to boost household spending, and even as the labour market has cooled, nominal wages are recovering some of their pre-pandemic levels. Meanwhile, trade, financial conditions and property sales are also looking up.
However, though the outlook is generally positive, not every country is thriving. Read on to discover how 25 of the world's key economies are expected to perform in 2025, ranked in terms of their projected growth from worst to best.
At just 1%, Germany’s growth will now be the slowest of any major developed economy next year. The OECD has knocked 0.1% off the figure it gave in its last forecast, published in May. This modest increase will follow a very sluggish 2024.
The OECD singles out Germany as notable for its weak industrial activity. Uncertainty over government support for green projects and potential supply chain disruption due to the volatile situation in the Middle East continue to pose significant risks. On the plus side, nominal wage growth has remained high and this, along with easing inflation, will add to household purchasing power.
Italy is expected to outperform Germany next year – but only just. At 1.1%, its growth will also rise above this year’s meagre 0.8%. Steadily growing wages, investments related to the national COVID-19 recovery fund, and an upswing in exports are expected to offset the nation's economic challenges to some extent.
The standout risk is a potential contraction in housing investment due to the scaling back of the "Superbonus" tax credit, which enabled residents to claim tax credits against the cost of qualifying home renovations. But Italy has plenty of other growth obstacles to contend with, including high interest rates and a staggering government debt-to-GDP ratio of 141%. The OECD’s projection for 2025 is a slight revision down from 1.2% predicted in May and comes as the Italian government is reportedly less certain of meeting this year’s growth target, according to Reuters.
The OECD has downgraded France's growth forecast for 2025 by 0.1% but it still expects to see some growth. Underpinning its projection are falling inflation and a moderate recovery in foreign demand, which should stimulate consumer spending and exports. The country’s services sector also enjoyed an upswing from Paris hosting the Olympics, though this may be temporary.
Like Italy, France has racked up massive public debt. Its debt is expected to equate to over 115% of the nation's GDP next year. Getting the figure down is among the French government's biggest challenges, and some painful fiscal consolidation could be on the cards in the future.
Mexico's economy is also projected to expand by 1.2% in 2025, though this will be a significant drop from the 2% that the OECD had expected to see in its previous forecast, and less than the 1.4% now predicted for 2024.
Private consumption, supported by historically low unemployment and increasing real household incomes, will be the crucial catalyst for growth. However, domestic demand has slowed somewhat. Mexico will continue to benefit from nearshoring as a growing number of major US firms move their manufacturing to the country, and exports are expected to pick up in 2025. But economic party poopers, including potentially persistent services inflation, could end up spoiling the fiesta and dampening growth in the worst-case scenario. Claudia Sheinbaum (pictured), is now the country’s first female president, having won a landslide election victory earlier this year.
The OECD has slightly upgraded Britain’s forecast since May, when it was at the bottom of the growth rankings. Strong wage growth and factors including a cut in national insurance and free childcare provide a supportive backdrop for a more resilient economy this year and next, with growth rising from 1.0% to 1.2%.
That said, the OECD expects the UK to have one of the highest inflation rates in the G7, and services inflation in particular remains stubbornly high. Meanwhile, investment is stagnant, and the tax burden is at its heaviest in 70 years. The country's new Labour government has made growth the linchpin of its plans to turn the economy around, but this is proving difficult to achieve. Despite the prediction of modest progress, the latest data reveals that the UK economy will continue to face challenges.
The OECD does not include the Netherlands in its interim report. However, in its full Economic Outlook published in May, it was cautiously optimistic about the country’s growth prospects for 2025. At 1.3%, the Dutch economy will outstrip the 0.7% predicted for 2024. Private consumption will be the principal growth engine as rising wages and easing inflation both boost spending.
Nevertheless, inflation is falling at a slower rate than in other EU nations, partially due to the tight Dutch labour market. Another potential complication is the possibility of widespread supply chain disruption due to the conflict in the Middle East as the Dutch economy is particularly “sensitive to global trade developments”, according to the OECD.
The latest 2025 OECD growth forecast for Japan has been upgraded by 0.3%. The projection for 1.4% is an improvement on this year's disappointing contraction of 0.1% amid temporary supply chain disruptions.
Rising wages, fiscal stimulus, and increased corporate investments are all bolstering the nation's economy as private consumption and business activity increase. Inflation is set to fall and its effects should be tempered by the Bank of Japan's decision earlier this year to abandon its long-standing negative interest rate policy.
South Africa's growth forecast for 2025 remains as it was in May and will improve on this year’s 1.0%. The nation has several economic hurdles to overcome, including reducing its hefty public debt and current account deficit to sustainable levels, along with a rise in its already-high rate of unemployment. Even so, its general financial situation is markedly improving, with exports and consumer spending on the up.
The power shortages and supply-chain bottlenecks that have plagued the country are finally easing. Inflation is falling, and in September the central bank made its first interest rate cut in more than four years. At the same time, real wages are climbing, and a pension reform that took place this year will hopefully put more money in retirees' pockets.
As it is not a member of the G20 group of nations, Switzerland does not feature in the OECD’s interim report. In May, the Economic Outlook predicted 1.4% growth for 2025, outperforming this year's forecast of 1.1%. The reasons given include a fall in inflation and the country's low interest rate, which has since fallen to just 1.0%.
Still, uncertainty around the forecast is high, and the country's economy is vulnerable to supply chain upsets that could arise due to the conflict in the Middle East. The OECD has also warned of the possibility of a sharp housing market correction, which could dampen growth in a pronounced way.
As another non-G20 country, Austria's GDP growth prediction comes from the OECD’s Economic Outlook published in May. The Austrian economy took an almighty battering last year when it contracted by 0.7% – and with growth of only 0.2% expected in 2024, the projected figure for next year is definitely something to celebrate.
Softening inflation and interest rates, coupled with increased external demand, will be the primary growth boosters. On the downside, private investment will likely stay muted next year, while any major disruption to global trade could rain on Austria's recovery parade.
The OECD sees next year’s US growth reduced by a whole percentage point from the impressive 2.6% that this year will achieve, but this is expected to be cushioned by monetary policy easing.
In September, the US Central Bank lowered interest rates for the first time in 4 years and this, along with cooling inflation and strong productivity gains, will buttress investment and spending. Geopolitical tensions, such as an intensifying trade war with China or supply chain disruption due to the Middle East conflict, could nevertheless weigh heavily on the US economy in 2025.
Canada's growth figure for next year has been maintained at the 1.8% predicted in May, slowing from what the OECD describes as a solid pace in early 2024. Yet there’s still a generally positive tone in its latest update.
Inflation has been brought down to 2.5% and is expected to fall further next year. The country's central bank has led the way on interest rate cuts, with more expected to follow. Legal immigration, which has climbed to its highest level since the 1950s, is helping to pep up private consumption and the labour market. Meanwhile wages are growing and although they have yet to recover their pre-pandemic levels, they should help workers to regain some of their lost purchasing power by 2025.
Australia's growth for next year has been downgraded since May by almost half a percent, though this will still represent an increase from the 1.1% figure now predicted for 2024.
High interest rates will dampen household spending, says the OECD, though it thinks strong population growth and higher exports will partly compensate for this. The problem is inflation, and especially services inflation, which is holding back interest rate cuts. Meanwhile, unemployment is projected to rise to 4.4 per cent. Being a major commodities exporter, Australia also faces the risk of being adversely affected by a slowdown in China or large-scale disruption to global trade.
New Zealand's not in the G20, so the OECD growth forecast for 2025 was made in May. It remained unchanged at 1.9%, which is 0.1% above the average for the OECD nations. As is the case in most countries, inflation is falling, and household purchasing power is increasing. The nation's economy also exited recession in June.
Prices for New Zealand's export commodities have risen, as has global demand, while tourism is flourishing. However, the nation's housing market is under a lot of strain, which could undermine growth. Other risk factors include the country's bulging current account deficit and possible global trade disruption should the conflict in the Middle East escalate, or China's economy fare worse than expected (China is New Zealand's biggest trading partner).
Spain's 2.2% growth forecast for 2025 is slightly improved from May’s 2% figure. With the ideal GDP growth rate for a developed economy between 2% and 3%, the country will be sitting on the sweet spot next year. Although growth will be less than the impressive 2.8% now expected for 2024, it remains resilient and indeed, will lead the major European economies.
Inflation is dropping in Spain; it's expected to dip to 2.1% in 2025. Meanwhile real wages are rising and unemployment – though high – continues to fall. Investment is poised to pick up as the Spanish government implements its COVID-19 recovery plan, and exports are expected to increase, too. But it's worth noting this growth could be harmed by factors such as major global trade disruption or a slower implementation of the recovery plan.
South Korea is forecast to see growth of 2.2% next year – slightly less than the final figure expected for 2024. Exports, particularly of semiconductors, are rebounding due to stronger global demand, while private consumption and investment will recover as interest rates fall. Inflation has cooled more than expected and even fallen below the target figure.
On the downside, geopolitical tensions – which could throw South Korea's supply chains into disarray and fuel inflation – represent a risk for the nation's economy.
The OECD has upped Brazil's 2025 growth forecast by half a percent, and it now stands at 2.6%. With year-on-year inflation forecast to fall, business investment is expected to bounce back. Meanwhile private consumption – the main growth driver – will remain strong, anchored by jobs growth and minimum wage hikes.
Be that as it may, a severe disruption to global trade, slower growth in China (a key export partner for Brazil), and a worse-than-anticipated fiscal balance all have the potential to undermine the country's growth. In September, Brazil’s Central Bank raised interest rates for the first time in two years, and the government’s latest data reveals that inflation for that month climbed to 0.44%
Ireland's 2025 growth is not examined in the interim report, but the figure back in May was unchanged from the previous OECD forecast at 2.9%. The country's data is skewed by the large number of multinationals that report their global incomes there. To better understand how the domestic economy is doing, economists look to an indicator called modified domestic demand (MDD).
Ireland's MDD was predicted to increase from 0.6% this year to 2.4% in 2025 as falling inflation and interest rates, a solid labour market, and other tailwinds boost business investment and consumer spending.
Türkiye's OECD growth forecast for 2025 is 0.1% down from the last update. At 3.1%, it's almost exactly the global average and one of the highest figures in the OECD. But don't let that fool you into thinking the Turkish economy is doing well.
Exports and tourism receipts are up, but inflation has been extremely high and though expected to fall in 2025, it will remain at almost 30%. Meanwhile unemployment is projected to reach 10% by the middle of next year. Reconstruction following last year's devastating earthquake in southern and central Türkiye is bolstering the national economy, but it's also pushing the deficit higher, meaning severe fiscal tightening is on the horizon. However, taming inflation is the nation's biggest economic challenge in 2025 and beyond. Very high interest rates are punishing businesses and households, and the country's economic growth has slowed to the weakest pace since the COVID-19 pandemic.
Another non-OECD country, Colombia's 2025 growth figure was upgraded by 0.3% in the OECD's May forecast.
Inflation is falling faster than expected in the South American country, leading to a more rapid loosening of monetary policy, stimulating consumer spending and business investment. Private consumption will also be supported by “significant remittances”. A projected moderate increase in exports also adds to the good news.
Argentina is currently mired in recession, with the country's economy expected to contract by no less than 4% this year. Yet the country is set for a return to growth in 2025 with a positive figure almost the mirror image of this year’s negative one.
Argentinians are feeling the pain of almost 150% inflation and President Javier Milei's economic "shock therapy", though the OECD describes his wave of austerity as "considerable but necessary". It expects inflation to ease in 2025 and economic restrictions to be gradually lifted. A rise in real wages is predicted, and business investment should also increase. This will propel growth into positive territory. But Argentina has a long way to go to achieve a healthy, vibrant economy that works for its people.
The OECD has kept China's growth forecast for 2025 at 4.5%, noting that policies aimed at stimulating the economy such as infrastructure spending are being offset by a property market crisis and weak consumer demand. High youth unemployment is also hampering growth. On the plus side, an increase in industrial production and growing demand for Chinese exports have improved economic prospects.
Even so, the 4.5% figure is modest compared to the 6.7% annualised growth the country reported in the late 2010s. And China isn't out of the woods by any means, with the ongoing real estate downturn, local government debt, and other negatives far from resolved. Geopolitical tensions with the West could also cast a shadow over the economy, especially if Beijing flexes its military muscle in the Taiwan Strait.
At 5.2%, Indonesia's growth forecast for 2025 also remains unchanged in the latest interim Economic Outlook. The OECD describes domestic demand as solid and says consumer confidence is improving. Inflation is expected to fall to within the government target of 2.5% and with this in mind, the central bank has made its first cut in interest rates since early 2021.
Although demand for Indonesia's exports should remain strong, reduced prices for its key commodities such as coal and palm oil will make for lower nominal export growth, creating a small trade deficit. Vulnerabilities are centred around the potential for global supply chain disruption since the Indonesian economy relies heavily on exports.
The latest OECD forecast for Vietnam comes from its May 2024 Economic Outlook. It expects the country to brush off domestic and external pressures such as high private debt levels and possible trade disruption, and predicts growth to hit 6.5%, up from 6% this year.
The principal drivers of this growth include generous government support, an accommodative monetary policy, and a gradual easing of financial pressures, along with increased demand for Vietnamese exports as the country cements its status as a global manufacturing hub. While inflation is expected to rise to 3.9%, it will remain below the central bank's target. A strengthening domestic market will further shore up the economy in 2025. However, the devastating typhoon that hit Vietnam in September is estimated to have caused up to $3.3 billion (£2.5bn) in damage, which could harm the country’s growth rate.
The fastest-growing major economy, India's output is expected to expand by no less than 6.8% in 2025. This represents a 0.2% upgrade since the last OECD forecast and comes on top of almost the exact same level of growth predicted for this year. The governor of India’s central bank has suggested sustainable growth of up to 8% in the coming years is a possibility.
The driving forces of India's growth include comprehensive public investment in infrastructure and other areas, healthy business investment, and blossoming exports, from tech products to IT and consulting services. There's a catch though: while inflation and interest rates are predicted to ease, private consumption is set to be lacklustre next year.
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