Global oil supply will grow by around 3.1 million bpd in 2025, and 2.5 million bpd next year, each up by around 100,000 bpd on the month, the IEA said. OPEC and other allies, has been boosting output since April. Other producers, such as the U.S. and Brazil, are also increasing supply, adding to glut fears and weighing on prices.
Most major institutions expect modest growth in 2026 (roughly 3.0~3.2% global GDP), continued easing of headline inflation from the 2024–25 highs, and a gradual shift in monetary policy from restrictive to more neutral/gradually easing – but the outlook is fragile and skewed to the downside.
Global economic growth is estimated to have stabilized at 2.7% in 2024 and is forecast to hold steady at that pace over 2025–26, according to the Global Economic Prospects Report.
Growth of Advanced Economies is projected to remain modest (around 1.5%), primarily due to the lagged effects of past monetary tightening and the cooling of strong post-pandemic fiscal support, and Emerging Market and Developing Economies (EMDEs): These economies are expected to maintain stronger growth (just above 4.0%), though this is lower than their historical average. This includes robust growth projected for regions like South Asia.
Trade barrier is cited as a major headwind. Escalating trade tensions and higher effective tariffs (particularly stemming from U.S. policy) are expected to increasingly weigh on global trade flows and business investment throughout 2026.
Geopolitics, or Geoeconomics, where trade and finance are used to advance political objectives—is expected to continue, fostering economic fragmentation and complicating investment decisions.
The pace of growth appears insufficient to offset the damage done to the global economy by several years of successive negative shocks, with particularly detrimental outcomes in the most vulnerable economies.
From a longer-term perspective, catch-up toward advanced-economy income levels has steadily weakened across emerging market and developing economies over the first quarter of the twenty-first century. Progress in reducing extreme poverty has also slowed markedly.
Heightened policy uncertainty and adverse trade policy shifts represent key downside risks to the outlook.
The global economy appears to be settling at a steady, rate of growth. Over 2025–26, decelerating growth in the United States and China is expected to be offset by firming growth elsewhere, including in many emerging market and developing economies.
Overall, the global economy is projected to expand at a slower pace compared to the pre-pandemic decade.
Some extremes of higher tariffs were tempered, thanks to subsequent deals and resets. But the overall environment remains volatile, and temporary factors that supported activity in the first half of 2025 – such as front-loading – are fading.
As a result, global growth projections in the latest World Economic Outlook (WEO) are revised upward relative to the April 2025 WEO but continue to mark a downward revision relative to the pre-policy-shift forecasts.
Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, with advanced economies growing around 1.5% and emerging market and developing economies just above 4%
Inflation is projected to continue to decline globally, though with variation across countries: above target in the United States – with risks tilted to the upside – and subdued elsewhere.
Risks are tilted to the downside. Prolonged uncertainty, more pro-tectionism, and labor supply shocks could reduce growth.
Fiscal vulnerabilities, potential financial market corrections, and erosion of institutions could threaten stability.
Policymakers are urged to res-tore confidence through credible, transparent, and sustainable policies. Trade diplomacy should be paired with macroeconomic adjustment. Fiscal buffers should be rebuilt.
Central bank independence should be preserved. Efforts on structural reforms should be redoubled.
Past actions to improve policy frameworks have served countries well. industrial policy may have a role, but full consideration should be given to opportunity costs and trade-offs involved in its use.
Global headline inflation is widely expected to continue its decline in 2026, though it may remain slightly above central bank targets in some Advanced Economies (AEs). For instance, the U.S. is projected to see inflation ease to around 2.8% (OECD), still slightly elevated.
With inflation moderating, central banks in many AEs (like the U.S. Federal Reserve) are expected to continue their interest rate easing cycles throughout 2026. However, policy rates are likely to settle at a higher neutral level than before the pandemic.
Details of newly introduced policy measures are slowly coming into focus, and growth prospects are shifting along with them.
After the United States introduced higher tariffs starting in February, subsequent deals and resets have tempered some extremes.
But uncertainty about the stability and trajectory of the global economy remains acute. Meanwhile, substantial cuts to international development aid and new restrictions on immigration have been rolled out in some advanced economies.
Several major economies have adopted a more stimulative fiscal stance, raising concerns about the sustainability of public finances and possible cross-border spillovers.
The world’s economies, institutions, and markets have been adjusting to a landscape marked by greater protectionism and fragmentation, with dim medium-term growth prospects and calling for a recalibration of macroeconomic policies.
At the onset of trade policy shifts and the surge in uncertainty, the April 2025 World Economic Outlook (WEO) revised the 2025 global growth projection downward by 0.5 percentage point to 2.8%
This was predicated on tariffs being supply shocks for tariff-imposing countries and demand shocks for the targeted, with uncertainty being a negative demand shock all around.
By July, announcements that lowered tariffs from their April highs prompted a modest upward revision to 3.0% Inflation projections, while little changed overall, went up for the United States and down for many other economies.
After a resilient start, the global economy is showing signs of a moderate slowdown, as predicted. Incoming data in the first half of 2025 showed robust activity.
Inflation in Asian economies was subdued, while it remained steady in the United States. This apparent resilience, however, seems to be largely attributable to temporary factors – such as front-loading of trade and investment and inventory management strategies – rather than to fundamental strength.
As these factors fade, weaker data are surfacing. The front-loading is unwinding, and labor markets are softening. Pass-through of tariffs to U.S. consumer prices, previously muted, appears increasingly likely. Advanced economies, traditionally reliant on immigration, are seeing sharp declines in net labor inflows, with implications for potential output.
Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and to 3.1% in 2026.
This is an improvement relative to the July WEO Update – but cumulatively 0.2 percentage point below forecasts made before the policy shifts in the October 2024 WEO, with the slowdown reflecting headwinds from uncertainty and protectionism, even though the tariff shock is smaller than originally announced.
On an end-of-year basis, global growth is projected to slow down from 3.6% in 2024 to 2.6% in 2025. Advanced economies are forecast to grow about 1.5% in 2025–26, with the United States slowing to 2.0%
Emerging market and developing economies are projected to moderate to just above 4.0% Inflation is expected to decline to 4.2% globally in 2025 and to 3.7% in 2026, with notable variation: above-target inflation in the United States – with risks tilted to the upside – and subdued inflation in much of the rest of the world.
World trade volume is forecast to grow at an average rate of 2.9% in 2025–26 – boosted by front-loading in 2025 yet still much slower than the 3.5% growth rate in 2024 – with persistent trade fragmentation limiting gains.
Risks to the outlook remain tilted to the downside, as they were in previous WEO reports. Prolonged policy uncertainty could dampen consumption and investment. Further escalation of protectionist measures, including nontariff barriers, could suppress investment, disrupt supply chains, and stifle productivity growth.
The World Trade Organization is sharply raising its forecast for trade growth in goods this year after an unexpectedly strong first half due to rising AI-related purchases, front-loaded imports in the U.S. over tariff fears and robust developing-world trade.
Economists are increasing their prediction of growth in merchandise trade to 2.4% this year, up from 0.9% as recently as August.
In April, WTO experts were actually anticipating a decline of goods trade this year of 0.2% However, they’re lowering the prediction for 2026 to 0.5%, from 1.8%.
The growth of export in services, meanwhile, is expected to come in at 4.6% in 2025 and 4.4% next year – both slower rates than the 6.8% tallied in 2024.
WTO pointed to “robust trade in artificial intelligence-related goods” that are driving the increase in merchandise trade, notably semi-conductors, servers and telecommu-nications equipment.
The global oil market faces an even bigger surplus next year of as much as 4.09 million barrels per day as OPEC+ producers and rivals lift output and demand growth slows,
IEA said. “Global oil market balances are looking increasingly lopsided, as world oil supply is forging ahead while oil demand growth remains modest by historical standards,” the IEA said in its report.
The outlook from the IEA, which advises industrialised countries, is the latest warning that the oil market is heading for oversupply. A surplus of 4.09 million bpd would be equal to almost 4% of world demand, and is much larger than other analysts’ predictions.
OPEC and other allies, has been boosting output since April. Other producers, such as the U.S. and Brazil, are also increasing supply, adding to glut fears and weighing on prices. Oil prices edged higher to around $63 a barrel after the IEA report to recoup some of the 2% drop after OPEC shifted its 2026 outlook to a small surplus, having earlier seen a sizeable deficit.
Global oil supply will grow by around 3.1 million bpd in 2025, and 2.5 million bpd next year, each up by around 100,000 bpd on the month, the IEA said.
Supply is rising faster than demand in the IEA’s view even after upward revisions The agency now expects oil demand to rise by 770,000 bpd next year, up 70,000 bpd from last month, citing increased needs in petrochemical plants.
The short-term outlook in the IEA’s monthly report contrasts with the agency’s annual outlook on Wednesday, which sees global oil and gas demand potentially rising until 2050.
OPEC sees a surplus of just 20,000 bpd next year, although this marks a further retreat from its forecast of a sizeable deficit.
Expect modest, fragile growth around ~3% in 2026 with inflation easing but remaining uneven.
The path will be shaped by (a) how quickly inflation and labor markets normalize, (b) trade policy and geopolitical developments, and (c) whether AI-driven investment becomes a durable growth engine – any of which could tilt 2026 meaningfully higher or lower.★
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