The Organization for Economic Co-operation and Development (OECD) has released a report indicating that the global economy is heading toward an unprecedented slowdown since the onset of the pandemic.

The report, summarized by several media outlets, underscores that trade conflicts initiated under former President Donald Trump are acting as a brake on growth among major economies, including the United States.

The OECD's outlook comes shortly after remarks from Hungarian central bank governor Mihály Varga on May 22, in which he expressed concerns over the world economy facing challenges related to slower growth and persistent inflation.

Varga identified three critical issues influencing global economic conditions by 2025:

1. The outcome of the trade war.

2. The implications of the U.S. budget on global challenges and the adaptation of the world to persistently high U.S. yields.

3. The impact of fiscal stimuli in Europe and how quickly these effects will be realized in GDP growth.

On Tuesday, the Hungarian economy reported stagnation in the first quarter of 2025, with a 0.4% decline compared to the previous year and a 0.2% decrease from the previous quarter.

This decline was primarily attributed to weaknesses in the industrial and construction sectors, although there was growth in household consumption and certain service sectors.

Experts caution that without a revival of investment and industrial activity, sustainable growth remains elusive.

In its latest announcement, the Paris-based OECD has downgraded its global growth forecast, particularly impacting the majority of G20 nations.

The organization highlighted that agreements aimed at reducing trade barriers are critical to restarting investment and avoiding runaway inflation.

The OECD projects the global economy to expand by only 2.9% in 2025 and 2026, marking a significant reduction from the more than 3% growth experienced each year since 2020, barring the pandemic-induced contraction.

The United States is expected to experience a sharp decline in growth, projected to fall from 2.8% last year to 1.6% in 2025 and further to 1.5% in 2026. Due to increasing inflation, it is anticipated that the Federal Reserve will not have the opportunity to cut interest rates this year.

The current report highlights deteriorating prospects compared to earlier predictions from March, prior to the announcement of new tariffs by Trump, dubbed “Liberation Day.” Although some of Trump's measures have been rolled back, the average tariff rate in the U.S. has surged from 2.5% to over 15%, an unprecedented level since World War II.

The OECD has also cut its growth forecasts for China, France, India, Japan, South Africa, and the United Kingdom for 2025. Álvaro Pereira, the organization's chief economist, stressed the urgency of concluding trade agreements, warning that without them, the impacts on growth could be severe and widespread.

The report suggests that the weakening economic outlook will be felt globally.

Uncertainty regarding the direction of global trade policy exacerbates the situation.

U.S. trade policy has become increasingly unpredictable, with Trump having implemented significant tariffs on China and subsequently threatening new measures against other regions, including a potential 50% tariff on steel and aluminum imports.

Current forecasts assume that the tariff levels in effect since mid-May will persist despite a recent court ruling indicating that Trump may have overstepped his presidential authority in implementing new tariffs.

Consequently, the OECD predicts that U.S. inflation could rise to close to 4% by the end of the year, remaining above the Federal Reserve's target through 2026.

As a result, the Fed is projected to only be able to consider interest rate cuts next year.

Current data already indicate a noticeable cooling of GDP growth in the United States, while inflation expectations are on the rise.

Among G20 member states, three-quarters have reported deteriorating prospects compared to March.

China's economy is projected to grow by 4.7% in 2025 and 4.3% in 2026, down from last year's 5%.

The Eurozone is expected to achieve a mere 1% growth in 2025, improving slightly to 1.2% in 2026.

Japan is anticipated to perform even worse, with growth rates of 0.7% this year and only 0.4% next year.

The UK economy is projected to expand by 1.3% and 1% respectively, falling short of earlier expectations of 1.4% and 1.2%.

Global trade is expected to grow by only 2.8% in 2025 and 2.2% in 2026, significantly lower than previous forecasts from December.

In addition to trade tensions, the OECD warns that fiscal risks are increasing, particularly due to pressure on defense spending.

At the same time, stock prices are reported to be at 'historically high' levels, increasing vulnerability to economic shocks.

Longstanding weakness in investment continues to pose challenges for developed economies.

The organization notes that while corporate profits are rising, businesses are investing less in tangible assets, opting instead for financial instruments or returning dividends to shareholders.

Reviving investment is deemed crucial for economic recovery and maintaining sustainable public finances.