Global financial tensions are mounting, with the Organization for Economic Co-operation and Development (OECD) warning of “tighter financial conditions” that pose particular risks for developing countries. The OECD has significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, signaling a challenging period for financial markets worldwide.
The OECD’s latest outlook report highlights that “weakened economic prospects will be felt around the world, with almost no exception,” leading to “lower growth and less trade [that] will hit incomes and slow job growth.” While the entire global economy is impacted, the report specifically points to the heightened vulnerability of developing nations facing “tighter financial conditions.”
Adding to these concerns, the OECD warns that “protectionism” will lead to increased inflation, driving up the cost of goods and services. This inflationary pressure, combined with already high debt levels, presents a critical challenge for developing countries. The report explicitly states that “high debt levels and tighter financial conditions pose particular risks for developing countries, many of which have large debt refinancing needs in the near future.”
In response to these escalating risks, the OECD advises central banks to remain vigilant against inflation. Crucially, it also urges countries to “ensure that public debt is, indeed, on a sustainable path.” The report emphasizes that boosting investment is “instrumental to revive our economies and improve public finances,” but acknowledges the difficulty for highly indebted governments to finance such essential projects in a climate of tighter financial conditions.