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AI Boom Cushions West Asia Energy Shock, Boosts Global Economy, Says OECD
- •The global economy remains resilient despite the West Asia conflict's energy shock, with strong AI-related activity offsetting the impact, according to the OECD.
- •Continued strength in AI-related activity has boosted investment, production, and trade, helping to mitigate economic damage from higher energy prices and supply disruptions.
- •Sizeable oil inventories, additional supply from outside the Gulf economies, and government support measures also helped cushion the impact on the global economy.
- •The OECD expects global GDP growth to remain around 2.9% in 2026 before edging up to 3% in 2027, though near-term growth momentum may soften due to higher commodity prices and restrictive monetary policy.
- •Inflationary pressures are expected to ease in 2027 as energy prices soften, with G20 headline inflation projected to decline from 4.1% in 2026 to 3.6% in 2027, and core inflation in advanced economies moderating.
Key Questions Answered
According to the OECD, continued strength in artificial intelligence-related activity has boosted investment, production, and trade, helping offset the economic damage and higher energy costs caused by the West Asia conflict. The IMF also noted that the global economy weathered the oil shock better than feared thanks to this AI investment boom acting as a positive demand shock.
The Paris-based OECD expects global GDP growth to remain around 2.9 per cent in 2026 before edging up slightly to 3 per cent in 2027. However, the organisation warns that growth momentum may soften in the near term as higher commodity prices push up inflation and monetary policy stays restrictive.
Headline inflation for G20 economies is projected to decline from 4.1 per cent in 2026 to 3.6 per cent in 2027. Additionally, core inflation across most advanced economies is expected to moderate, falling from 2.7 per cent down to 2.5 per cent by 2027 as energy prices soften.
