The global economy is facing significant challenges in 2025, with US tariffs and Germany’s economic downturn creating major obstacles, according to a new report from the Organisation for Economic Co-operation and Development (OECD). Trade tensions initiated by US President Donald Trump are exerting pressure on global markets, while economic weakness in Germany and Japan, the world’s third and fourth-largest economies, is further slowing growth.
Germany’s Outlook Worsens Further
The OECD has revised its growth projections for Germany downward once again. In December, Germany was already ranked at the bottom of the forecast with a 0.7% growth rate, but this has now been downgraded to 0.4%. Only Mexico is expected to perform worse, with a 1.3% contraction, largely due to the impact of US tariffs. Canada, another key trade partner affected by these tariffs, also saw its growth forecast slashed to 0.7%, down from 1.5% in 2024.
The Fastest-Growing Economies in 2025
Despite the global slowdown, several countries are experiencing rapid economic expansion. India remains the world’s leading growth driver, with its economy set to expand by more than 6% in both 2025 and 2026. The country, now the world’s most populous nation, has already surpassed the UK to become the fifth-largest economy.
Other top-performing economies include:
- China – Projected to grow by 5%
- Indonesia – Expected to match China’s 5% growth rate
- Argentina – Set for a 5.7% rebound after last year’s economic downturn
- Saudi Arabia – Forecasted to grow by 3.7%, bouncing back from a sluggish period
Argentina’s Economic Comeback
One of the most striking turnarounds is expected in Argentina. After the country entered a deep recession following President Javier Milei’s economic reforms in 2024, the economy contracted by 1.8%. However, the OECD predicts a strong recovery, with 5.7% growth in 2025, placing Argentina among the fastest-growing economies worldwide.
Global Uncertainty and Economic Risks
The OECD’s projections assume that US tariffs will take full effect, prompting Canada and Mexico to implement retaliatory measures. The report warns that escalating trade and geopolitical tensions are discouraging business investment and leading consumers to spend cautiously.
While the United States has so far maintained moderate growth, the OECD predicts that by next year, the US economy will also feel the impact of its trade policies, leading to a significant slowdown.
Germany, meanwhile, may see some improvement in 2026, with projected growth of 1.1%, bringing it in line with the Eurozone average and positioning it within the lower mid-range of global economic growth. However, the Ifo Institute is less optimistic, forecasting only 0.2% growth for Germany in 2025 and 0.8% in 2026.
As global uncertainties persist, the OECD warns that maintaining economic stability will require careful navigation of trade policies and geopolitical risks.
(With materials from dpa)
