OECD: AI Mitigates Shocks of Energy Crisis on Global Economy

The Organisation for Economic Co-operation and Development (OECD) announced on Wednesday that investments in artificial intelligence (AI) are boosting the global economy's resilience this year, surpassing previous expectations. However, the energy crisis is becoming more entrenched, casting a shadow over economic forecasts for 2027, according to Reuters. A progress report by the OECD on economic outlooks stated that after achieving 3.4 percent growth last year, global economic growth is projected to slow to 2.9 percent in 2026, which is a slight improvement over the 2.8 percent forecast in June. Approaching 2027, the commodity price crisis stemming from the ongoing conflict in the Middle East is expected to negatively impact economic momentum. Consequently, the OECD predicts global growth will rise to only 3 percent, a decrease from the 3.1 percent in its June projections. The organization highlighted the pivotal role of significant spending on AI infrastructure, from data centers to semiconductors, as a key factor in strengthening economic resilience this year. This has contributed to driving growth in the United States and boosting technology exports from Japan and Korea. Nevertheless, the OECD warned that the global outlook is surrounded by considerable uncertainty due to several factors, including potential fluctuations in the energy market, extreme weather events linked to a strong El Niño phenomenon, rising government bond yields, and disappointing investments in AI. In its assessments, the organization stated that if these risks materialize, they could collectively lead to a 0.7 percentage point reduction in global growth and a 1.1 percentage point increase in global inflation next year. Under the OECD's baseline scenario, inflation in G20 economies is expected to reach 4.1 percent in 2026, an increase from the 4 percent forecast in June. The organization also raised its inflation outlook for 2027 to 3.6 percent from 3.1 percent in June, indicating that this might compel central banks to adjust interest rates if price pressures widen or growth falters. **Divergent Economic Outlooks** In the United States, the world's largest economy, growth is projected to be 2.2 percent this year and 2.1 percent in 2027, both higher than June's forecasts. This is attributed to robust AI-related investments offsetting weaker consumer spending. US inflation is expected to climb to 3.6 percent in 2026 before receding to 2.6 percent in 2027, pressured by tariffs and higher energy costs affecting household purchasing power and corporate expenses. China's growth is expected to decelerate to 4.5 percent this year and 4.2 percent in 2027, unchanged from June's forecasts. This is due to Beijing's restrictions on industrial overcapacity impacting investment, even as consumption faces gradual inflationary increases. The Eurozone's growth is anticipated to stabilize at 1 percent in both 2026 and 2027, as elevated energy prices and high interest rates weigh on economic activity before new defense spending initiatives provide support. Eurozone inflation is forecast to reach 3 percent this year and 2.9 percent in 2027, partly driven by a sharp jump in natural gas prices, coinciding with European storage levels hitting their lowest in 15 years as the winter heating season approaches. For Japan, economic growth is predicted at 0.8 percent in 2026 and 0.7 percent in 2027, with strong business investments compensating for higher interest rates and more expensive energy imports. Unlike other major economies, Japan's inflation is expected to accelerate to 2.6 percent in 2027 from 1.8 percent this year, reflecting a tight labor market and robust wage growth. The OECD lowered its growth forecasts for Canada in 2026 to 0.9 percent from 1.2 percent in June, and also trimmed its 2027 projections to 1.3 percent from 1.7 percent, citing new US tariffs on Canadian exports.