RIYADH: Saudi Arabia’s real gross domestic product is projected to grow by 2.5 percent in 2026, a rate that surpasses forecasts for the US, Germany, the UK, and France, according to an analysis.

In its latest report, the Organization for Economic Cooperation and Development said that the Kingdom’s economy is projected to grow by 1.8 percent this year, also higher than several of its G20 peers. 

In April, the International Monetary Fund projected that the Kingdom’s economy would witness a growth of 3 percent in 2025 and would further accelerate to 3.7 percent the following year. 

In its latest report, the OECD also downgraded its global economic growth prospects from 3 percent to 2.9 percent for both 2025 and 2026. 

“The global outlook is becoming increasingly challenging. Substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence, and elevated policy uncertainty all pose significant risks to growth,” said the OECD. 

It added: “Global GDP growth is projected to slow from 3.3 percent in 2024 to 2.9 percent this year and next year based on the assumption that tariff rates as of mid-May are sustained.” 

Collectively, G20 nations are expected to witness an economic growth of 2.9 percent in both 2025 and 2026, with India bucking the trend amid economic volatility. 

According to the report, India’s GDP is expected to expand by 6.3 percent in 2025 and 6.4 percent in 2026. 

The OECD added that China’s economy will grow by 4.7 percent and 4.3 percent in 2025 and 2026, respectively, while the US is expected to witness an economic growth of 1.6 percent in 2025 and 1.5 percent in 2026. 

The French economy is forecast to expand by 0.6 percent in 2025 before slightly accelerating to 0.9 percent in 2026, and the OECD projects the UK’s economy will advance by 1.3 percent in 2025, while it will decelerate to 1 percent growth next year. 

According to the report, Germany’s GDP is set to grow by 1.2 percent during 2026.

The OECD further stated that Saudi Arabia is expected to maintain a healthy inflation rate of 1.9 percent in 2025 and 1.8 percent in 2026, respectively. 

In April, the IMF also predicted that inflation in the Kingdom would remain contained, with the average annual rate holding steady at 2.1 percent in 2025 and easing slightly to 2 percent the following year. 

Collectively, among G20 nations, inflation is expected to average 3.6 percent in 2025 and 3.2 percent in 2026, according to OECD. 

“Rising trade costs — particularly in countries implementing new tariffs — are likely to fuel inflation, although this may be partly offset by softer commodity prices. Risks to the outlook remain substantial,” said OECD. 

It added: “Inflation may also stay elevated for longer than anticipated, especially if inflation expectations continue to rise. On the upside, an early reversal of recent trade barriers could boost economic growth and help ease inflationary pressures.” 

The OECD emphasized that governments should work together to resolve their concerns about the global trading system rather than escalating tensions through more retaliatory trade barriers.

The analysis urged governments to implement reforms that would reduce trade fragmentation, along with strengthening the supply chain by diversifying both suppliers and buyers. 

The OECD also highlighted the importance of implementing effective monetary policies, noting that central banks should remain vigilant to prevent disinflation in times of heightened uncertainty and increased trade costs. 

“Provided trade tensions do not intensify further and inflation expectations remain anchored, policy rate reductions can continue in economies where inflation is projected to moderate,” added the report. 

The study also emphasized the need to increase investments to ensure resilient growth among nations, suggesting that governments should implement structural policy reforms to revitalize the business environment.

According to the OECD, governments should foster business dynamism by promoting competition, reducing entry barriers, and supporting entrepreneurship. 

“Reducing policy uncertainty is particularly important, as it would lower the risk premia businesses build into their hurdle rates, thereby encouraging capital spending,” added the OECD.