At last, some reasonably good news: the prospects for the global economy are brightening, according to the latest OECD Economic Outlook. Despite headwinds such as the war in Ukraine, conflict in the Middle East, and higher-than-desirable interest rates, global activity is relatively robust. Inflation has eased faster than expected, and business confidence is improving. Unemployment remains low, and real wages are on the rise, boosting consumption.

However, though the general outlook is cautiously optimistic, 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. 

The UK is expected to see the slowest growth of the major developed economies next year, with the latest OECD forecast a 0.2 percentage point downgrade from the previous projection. It's not all doom and gloom, though. Strong wage growth and easing headline inflation – together with softening interest rates and factors including a cut in national insurance and free childcare – provide a supportive backdrop for a more resilient economy.

That said, services inflation remains stubbornly high, investment is stagnant, and the tax burden has never been so heavy. The country's new Labour government has made growth the linchpin of its plans to turn the economy around but it's proving difficult to attain. Despite predictions of a modest return to growth in July, the latest data reveals that the UK economy continued to flatline.

After a sluggish 2024, Germany is expected to outperform the UK next year – just. The OECD anticipates growth of 1.1%, though as is the case for the UK, it's revised its forecast downwards (albeit by only 0.1%).

Key factors driving this modest growth include increased household purchasing power thanks to rising wages and declining inflation, combined with a recovery in private investment and exports amid strengthening global demand. However, uncertainty over government support for green projects and the potential for supply chain disruption caused by the volatile situation in the Middle East could pose significant risks to Germany's economic outlook.

The latest 2025 OECD growth forecast for Japan has also been downgraded by 0.1%, but the projection for 1.1% is an improvement on this year's disappointing 0.5%. Rising wages, fiscal stimulus, and increased corporate investments are poised to bolster the nation's economy as private consumption and business activity increase.

Inflation is set to fall and then rise again, but its effects should be tempered by the Bank of Japan's decision earlier this year to abandon its long-standing negative interest rate policy.

Italy's growth forecast for next year remains unchanged from the last OECD update at 1.2%. Steadily rising wages, investments related to the national COVID-19 recovery fund, and an upswing in exports are expected to offset the nation's economic challenges – though only to a degree.

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%. That said, 1.2% looks likely based on current projections and the Italian government is reportedly confident of achieving it, according to Reuters.

The OECD has upgraded France's growth forecast for 2025 by 0.1%. Underpinning this marginally improved projection are falling inflation, recovering investment, and increasing external demand, which should stimulate consumer spending and exports. The country is also banking on a boost from its successful hosting of the Olympics.

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.

The OECD is more positive about the Netherlands' growth prospects for 2025 in its latest outlook, having upped its projection by 0.2%. 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.

Likewise, South Africa's growth forecast for 2025 has been upgraded by 0.2%. While the nation has several economic hurdles to overcome, including reducing its hefty public debt and current account deficit to sustainable levels, 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, as is unemployment, and an interest rate cut is reportedly imminent. At the same time, real wages are climbing, and a pension reform that takes effect later this year will hopefully put more money in retirees' pockets.

The OECD has stuck with its prediction of 1.4% growth for Switzerland in 2025. The Swiss economy is expected to outperform this year's forecast of 1.1%, mainly thanks to a fall in inflation and interest rates, which are projected to drop from 1.25% to 0.75%.

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.

Austria's GDP growth prediction for 2025 also remains unchanged. 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.

Canada's growth figure for next year has been revised down by 0.1%, but the OECD is striking a generally positive tone in its latest update. The figure of 1.8% is exactly the OECD average but well below the G20 average of 3.1% and the global average of 3.2%.

Inflation has been brought down to 2.5% and the country's central bank has led the way on interest rate cuts, with more expected to follow. With global demand increasing, exports are rising, and the business investment landscape is improving. Legal immigration, which has climbed to its highest level since the 1950s, is helping to pep up private consumption and the labour market. However, the rising cost of property in Canada is a particular cause for concern.

The OECD's 2025 growth prediction for the US is now on par with its forecast for Canada after the organisation bumped up the projection by 0.1% from 1.7%. While the figure is down on this year's impressive growth forecast of 2.6%, it's still good news for America.

Cooling inflation, an imminent expected cut in interest rates, and a booming labour market will buttress investment and spending. But if inflation fails to soften enough for the Fed to cut interest rates in a meaningful way, growth will be impacted. Geopolitical tensions, such as an intensifying trade war with China or supply chain disruption due to the Middle East conflict, could also weigh heavily on the US economy in 2025.

New Zealand's OECD growth forecast for 2025 remains 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).

Mexico's economy is projected to expand by 2% in 2025, with the OECD standing by its previous forecast.

Private consumption will be the crucial catalyst for growth, supported by historically low unemployment and increasing real household incomes. 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. President-elect Claudia Sheinbaum (pictured), will become the country's first female president later this year.

Spain's 2% growth forecast for 2025 also remains unaltered. 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, an increase on the 1.8% expected in 2024.

Inflation is dropping in the country – it's expected to dip to 2.3% in 2025 – while real wages are rising and unemployment 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.

The OECD has upped Brazil's 2025 growth forecast by 0.1% and it now stands at 2.1%. With inflation and interest rates coming down, business investment is set 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. The latest data from Brazil's central bank also revealed that the economy shrank by 0.4% in July.

Australia's growth figure for next year has been modestly upgraded from 2.1% to 2.2%, an increase from the 1.5% figure predicted for 2024.

The high inflation and interest rates that have held back consumer spending this year are largely expected to ease, though services inflation could remain high. Other positives include a forecast increase in exports. However, that sticky services inflation could delay interest rate cuts should it persist, and, like Brazil, Australia faces the risk of being adversely affected by a slowdown in China or large-scale disruption to global trade.

South Korea is forecast to see growth of 2.2% next year, an upgrade of 0.1% from the previous OECD estimate. Exports, particularly of the nation's semiconductors, are projected to rebound due to stronger global demand, while private consumption and investment will recover as interest rates fall. Inflation is projected to hit the target range by the start of 2025.

On the downside, geopolitical tensions – which could throw South Korea's supply chains into disarray and fuel inflation – represent the primary downside risk for the nation's economy.

Argentina is currently mired in recession, with the country's economy expected to contract by 3.3% this year. Argentinians are feeling the pain of sky-high inflation and President Javier Milei's economic "shock therapy", though the OECD describes the wave of austerity sweeping the nation as "considerable but necessary". On the bright side, the country is set for less of a rough ride in 2025.

Inflation should ease and economic restrictions will 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.

Ireland's 2025 growth figure is unchanged from the previous OECD forecast at 2.9%. The country's data is skewered 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 is 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 also remains unchanged from the last update. At 3.2%, it's in line with the global average and the second-highest figure in the OECD after Costa Rica, which is projected to see growth of 3.6%. But don't let that fool you into thinking the Turkish economy is doing well.

Although exports and tourism receipts are up, inflation remains extremely high and is expected to stay that way, while 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. 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.

Colombia's 2025 growth figure has been upgraded by 0.3% in the OECD's latest 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.

The OECD has raised China's growth forecast for 2025 by 0.3%, too. The economy of the People's Republic is in the doldrums, with everything from a property market crisis to weak consumer demand and high youth unemployment hampering growth. But an increase in infrastructure spending and manufacturing investment, as well as growing demand for Chinese exports and easing of local government debt, have improved China's 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 China's struggling economy, especially if Beijing flexes its military muscle in the Taiwan Strait.

Indonesia's growth forecast for 2025 remains unchanged in the latest OECD Economic Outlook at 5.2%.

Inflation is expected to fall to within the government target of 2.5% (plus or minus 1%), with interest rate cuts to follow. Other indicators, from government spending to consumer confidence, will see growth. Although demand for Indonesia's exports should remain strong, lower 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.

In 2025, Vietnam's economy is expected to brush off domestic and external pressures such as high private debt levels and possible trade disruption. Its growth is forecast 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 recently hit the country is estimated to have caused $1.6 billion in damage, which could lead to a correction in Vietnam's growth rate.

The fastest-growing major economy, India's output is expected to expand by 6.6% in 2025. The country's forecast has been upgraded by 0.1% since the last OECD update, and the governor of the nation'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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