Global growth is stalling

Global economic growth is losing steam, and is expected to decelerate to 2.9% in 2025 and 2026, down from 3.3% in 2024, the Organization for Economic Cooperation and Development (OECD) warned in its latest Economic Outlook (pdf). The figures for this year and next would mark the first time since the pandemic that global growth would come in below 3%, the Financial Times reports.

The slowdown will be led by the world’s largest economies: US growth is forecasted to fall sharply to 1.6% in 2025 and 1.5% in 2026 from 2.8% in 2024, while China could see a slowdown from 5.0% to 4.7% and then 4.3%. In contrast, the eurozone will inch forward, with growth picking up slightly to 1.0% in 2025 and 1.2% in 2026, from just 0.8% in 2024. Despite this, “[weakened] economic prospects will be felt around the world, with almost no exception,” the OECD said.

The OECD attributed the downshift to tighter financial conditions, elevated trade barriers, and falling investment confidence. “The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,” Secretary-General Mathias Cormann said in an accompanying press release.

In our neck of the woods: The OECD sees Saudi Arabia’s real GDP growing 1.8% in 2025 and 2.5% in 2026, up from 1.2% in 2024, outpacing the US, Germany, the UK, and France, while falling below average growth for G20 countries (forecasted to remain stable at 2.9% this year and next). Inflation is seen by the OECD rising slightly by 0.2 percentage points y-o-y to 1.9% in 2025, before easing to 1.8% in 2026, ranking among the top three lowest inflation rates among G20 countries.

Trump tariffs bite: The OECD cited President Donald Trump’s recently enacted tariffs as a major drag and risk for economies. The effective tariff rate has jumped from 2.5% to over 15% — the highest since WWII — and could keep US inflation elevated around 4% into 2025, the FT reports. That’s likely to delay any rate cuts from the Federal Reserve; however, policy rate cuts could follow in countries more shielded from trade tensions if inflation stays under control.

Global inflation is easing, but slowly: Inflation across G20 economies is expected to decline to 3.6% in 2025 and 3.2% in 2026. However, trade tensions could keep price pressures stubborn in some countries, although this will be tempered somewhat by lower commodity prices, the OECD said.

Trade recovery remains sluggish: Global trade growth is seen slowing to 2.8% this year and just 2.2% in 2026 — far below historical averages, the FT reports. Any further retaliatory moves in response to tariffs would also weigh on trade flows through supply chain disruptions.

What’s needed? The OECD called for renewed global cooperation to “[preserve] the economic benefits of rules-based global trade” and urged governments to enact structural reforms that could jumpstart investment, which has stagnated since the 2008 financial crisis.

MARKETS THIS MORNING-

Asian markets are firmly in the green this morning, led by South Korean markets, which are up on the back of the country electing the opposition party leader as president. The Kospi index rose to its highest level since last August, according to CNBC.

Wall Street futures indicate another day of markets opening in the red, despite consecutive days of gains buoyed by tech stocks.

THE CLOSING BELL-

The DFM rose 0.7% yesterday on turnover of AED 626.1 mn. The index is up 7% YTD.

In the green: Amlak Finance (+14.3%), Al Mazaya Holding Company (+14.0%) and Shuaa (+5.7%).

In the red: Emirates Investment Bank (-6.3%), Agility The Public Warehousing Company (-3.2%) and Al Salam Sudan (-2.9%).

Over on the ADX, the index rose 0.5% on turnover of AED 1.3 bn . Meanwhile, Nasdaq Dubai was up 0.8%.

CORPORATE ACTIONS-

United Arab Bank (UAB) invited its existing shareholders to subscribe to a rights issue as it looks to increase its capital from AED 2.06 bn to AED 3.09 bn, according to a disclosure (pdf) to the ADX. Some 1.03 bn new shares will be issued at a price of AED 1 each, for the AED 1.03 bn rights issue which the firm signed off on back in March as it looks to shore up its financial position and boost its growth plans. UAE’s general assembly and the Securities and Commodities Authority (SCA) approved the move. Shareholders have until 17 June to subscribe and the rights will be deposited into a clearing or brokerage account.

ADVISORS- First Abu Dhabi Bank was appointed as the lead manager and bookrunner for the issue, with Al Tamini & Co serving as counsel.