Global growth is projected to moderate Find GDP projections, OECD

Global growth is projected to moderate Find GDP projections, OECD

PARIS - Global GDP growth is expected to moderate from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, with higher trade barriers in several G20 economies and increased policy uncertainty weighing on investment and household spending.

Summary

• Global output growth remained resilient in 2024, with robust expansions in the United States and
several large emerging-market economies, including China.

• Recent activity indicators have begun to point to a softening of global growth prospects. Business
and consumer sentiment have weakened in some countries, and indicators of economic policy
uncertainty have risen markedly around the world.

• Significant changes have occurred in trade policies that if sustained would hit global growth and
raise inflation.

• Inflationary pressures continue to linger in many economies. Services inflation is still elevated, with
labour markets tight, and goods inflation is picking up from very low levels.

• Global GDP growth is projected to moderate from 3.2% in 2024, to 3.1% in 2025 and 3.0% in 2026,
with higher trade barriers in several G20 economies and increased geopolitical and policy
uncertainty weighing on investment and household spending.

• Annual GDP growth in the United States is projected to slow from its strong recent pace, to be
2.2% in 2025 and 1.6% in 2026. Euro area GDP growth is projected to be 1.0% in 2025 and 1.2%
in 2026, as heightened uncertainty keeps growth subdued. Growth in China is projected to slow
from 4.8% this year to 4.4% in 2026.

• Inflation is projected to be higher than previously expected, although still moderating as economic
growth softens. Headline inflation is projected to fall from 3.8% in 2025 to 3.2% in 2026 in the G20
economies. Core inflation is now projected to remain above central bank targets in many countries
in 2026, including the United States.

• These projections are based on an assumption that bilateral tariffs between Canada and the United
States and between Mexico and the United States are raised by an additional 25 percentage points
on almost all merchandise imports from April. Activity would be stronger and inflation lower in all
three economies if these tariff increases were lower or confined to a smaller range of goods, but
global growth would still be weaker than previously expected.

• Significant risks remain. Further fragmentation of the global economy is a key concern. Higher and
broader increases in trade barriers would hit growth around the world and add to inflation.
Higher-than-expected inflation would prompt more restrictive monetary policy and could give rise
to disruptive repricing in financial markets. On the upside, a more stable policy environment would
reduce uncertainty, and agreements that lower tariffs from current levels and more ambitious
structural policy reforms could strengthen growth. Higher government spending on defence could
also support growth in the near-term, but potentially add to longer-term fiscal pressures.

• Central banks should remain vigilant given heightened uncertainty and the potential for higher trade costs to push up wage and price pressures. Provided inflation expectations remain well anchored, and trade tensions do not intensify further, policy rate reductions should continue in economies inwhich underlying inflation is projected to moderate or remain subdued.

• Fiscal discipline is needed to ensure debt sustainability, maintain the ability for governments to
react to future shocks and accommodate current and future spending pressures.

• Countries need to find ways of addressing their concerns together within the global trading system.
Living standards would benefit from coupling these measures with efforts to strengthen the
resilience of supply chains, as well as regulatory reforms that promote dynamic product and labour
markets and policies to encourage skill upgrades.

• Faster diffusion of artificial intelligence technologies could also have significant productivity
benefits. Governments can help by ensuring the availability of high-speed digital infrastructure,
maintaining open and competitive markets and providing opportunities for workers to enhance their
skills.

To download the full report, visit: file:///Users/mac/Downloads/89af4857-en.pdf

Israel's wars on Gaza and Lebanon cost $31 billion in 2024

Israel's wars on Gaza and Lebanon cost $31 billion in 2024

JERUSALEM - Israel spent 112 billion shekels ($31 billion) on its military offensives in Gaza and Lebanon in 2024, Israel's finance ministry said in a report on Monday.

Total spending on defence in 2024 was 168.5 billion shekels, or 8.4 percent of gross domestic product, up from 98.1 billion in 2023, when defence costs were 5.2 percent of GDP, the report showed.

The increase in war spending pushed the budget deficit to 6.8 percent of GDP in 2024, a revision from a preliminary estimate of 6.9 percent. Israel's economy grew 0.9 percent in 2024.

Before the wars, in May 2023, Israeli lawmakers approved a 2024 budget of 513.7 billion shekels but the fighting required three additional budgets in 2024 that raised state spending by 21 percent to 620.6 billion shekels. Revenue last year was 484.9 billion shekels.

The deficit, which had topped eight percent of GDP during 2024, has since eased and stood at 5.3 percent in February.

Due to political infighting, Israel has yet to approve a budget for 2025 and the country is using a prorated version of the base 2024 budget.

Failure of lawmakers to pass a budget by the end of March would trigger new elections. The budget draft of tax hikes and steep spending cuts will be approved on time, said Finance Minister Bezalel Smotrich.

"It is crucial to reduce the deficit below 5% of GDP to stabilise government expenditures and the debt-to-GDP ratio," Accountant General Yali Rothenberg said.

Earlier reports said that the Israeli ministry had not published monthly reports on war costs since January, raising concerns over transparency in government spending.

Israel's war on Gaza, described by many as a genocide, began on 7 October 2023 and ended in a ceasefire deal with Hamas on 19 January.

The offensive killed more than 61,700 Palestinians – mostly civilians – including more than 48,570 confirmed dead and others believed to still be beneath the rubble.

In Lebanon, Hezbollah began cross-border attacks on Israel in parallel to the war on Gaza in a "support front" to the Palestinians, but the hostilities escalated into a full-blown war in September before a ceasefire deal ended the conflict there on 27 November.

That war is said to have killed around 6,000 people in Lebanon. Israel has continued to carry out deadly attacks in both Lebanon and Gaza despite the ceasefire deals.

The war in Gaza and simultaneous fighting with Hezbollah have been the longest in Israel's history, and have had a significant impact on its economy.

Israel's economy is likely to remain strained in the long term, especially as military spending continues and many Israelis have not yet returned home to the north, observers say.

Tens of thousands of Galilee residents near the border with Lebanon were forced to leave their homes once clashes erupted with Hezbollah on 8 October 2023.

The Israeli government has been burdened with temporarily accommodating them in relatively safer parts of Israel.

But despite Hezbollah being battered by the war and most incapable of fighting Israel in the foreseeable future – and with a ceasefire deal that obliges it to disarm and withdraw from southern Lebanon – many north Israeli residents have refused to return home.

Ukraine world’s biggest arms importer; US dominates arms exports as Russian exports fall

Ukraine world’s biggest arms importer; US dominates arms exports as Russian exports fall

STOCKHOLM - Ukraine became the world’s largest importer of major arms in the period 2020–24, with its imports increasing nearly 100 times over compared with 2015–19. European arms imports overall grew by 155 per cent between the same periods, as states responded to Russia’s invasion of Ukraine and uncertainty over the future of US foreign policy. The United States further increased its share of global arms exports to 43 per cent, while Russia’s exports fell by 64 per cent, according to new data on international arms transfers published today by the Stockholm International Peace Research Institute (SIPRI), available at www.sipri.org.

The overall volume of arms transfers globally remained at roughly the same level as in 2015–19 and 2010–14 (but was 18 per cent higher than in 2005–2009), as increasing imports in Europe and the Americas were offset by decreases in other regions. The top 10 arms exporters in 2020–24 were the same as those in 2015–19 but Russia (accounting for 7.8 per cent of global arms exports) fell to third place behind France (9.6 per cent), while Italy (4.8 per cent) jumped from 10th to sixth place.

At least 35 states sent weapons to Ukraine after Russia’s full-scale invasion in 2022, and substantial further deliveries are in the pipeline. Ukraine received 8.8 per cent of global arms imports in 2020–24. Most of the major arms supplied to Ukraine came from the USA (45 per cent), followed by Germany (12 per cent) and Poland (11 per cent). Ukraine was the only European state among the top 10 importers in 2020–24, although many other European states significantly increased their arms imports in the period.

‘The new arms transfers figures clearly reflect the rearmament taking place among states in Europe in response to the threat from Russia,’ said Mathew George, Programme Director with the SIPRI Arms Transfers Programme. ‘However, some major arms importers, including Saudi Arabia, India and China, saw large declines in import volumes for a variety of reasons, despite high threat perceptions in their regions.’

European NATO members increase dependence on US-supplied arms

Arms imports by the European NATO members more than doubled between 2015–19 and 2020–24 (+105 per cent). The USA supplied 64 per cent of these arms, a substantially larger share than in 2015–19 (52 per cent). The other main suppliers were France and South Korea (accounting for 6.5 per cent each), Germany (4.7 per cent) and Israel (3.9 per cent).

‘With an increasingly belligerent Russia and transatlantic relations under stress during the first Trump presidency, European NATO states have taken steps to reduce their dependence on arms imports and to strengthen the European arms industry,’ said Pieter Wezeman, Senior Researcher with the SIPRI Arms Transfers Programme. ‘But the transatlantic arms-supply relationship has deep roots. Imports from the USA have risen and European NATO states have almost 500 combat aircraft and many other weapons still on order from the USA.’

USA further increases its share of arms exports, while Russian exports slide

Arms exports by the USA increased by 21 per cent between 2015–19 and 2020–24, and its share of global arms exports grew from 35 per cent to 43 per cent. The USA supplied major arms to 107 states in 2020–24.

For the first time in two decades, the largest share of US arms exports in 2020–24 went to Europe (35 per cent) rather than the Middle East (33 per cent). Nevertheless, the top single recipient of US arms was Saudi Arabia (12 per cent of US arms exports).

‘The USA is in a unique position when it comes to arms exports. At 43 per cent, its share of global arms exports is more than four times as much as the next-largest exporter, France,’ said Mathew George. ‘The USA continues to be the supplier of choice for advanced long-range strike capabilities like combat aircraft.’

In contrast to the USA, arms exports by Russia fell sharply (–64 per cent) between 2015–19 and 2020–24. The decline started before Russia’s full-scale invasion of Ukraine in February 2022: in 2020 and 2021 export volumes were much smaller than in any year in the previous two decades.

‘The war against Ukraine has further accelerated the drop in Russia’s arms exports because more weapons are needed on the battlefield, trade sanctions make it harder for Russia to produce and sell its weapons, and the USA and its allies pressure states not to buy Russian arms,’ said Pieter Wezeman. ‘Two of Russia’s most important arms-trading relationships had already weakened before 2022, with India increasingly favouring other suppliers, and China sourcing more arms from its own burgeoning arms industry.’

Russia delivered major arms to 33 states in 2020–24. Two thirds of Russian arms exports went to three states: India (38 per cent), China (17 per cent) and Kazakhstan (11 per cent).

France became the world’s second largest arms supplier in 2020–24, delivering arms to 65 states. France’s exports of major arms to other European states almost trebled between 2015–19 and 2020–24 (+187 per cent). This was mainly due to deliveries of combat aircraft to Greece and Croatia, and arms supplies to Ukraine after Russia’s full-scale invasion in 2022.

Nevertheless, India received by far the largest share of French arms exports (28 per cent)—almost twice the share that went to all European recipients combined (15 per cent). The second largest recipient of major arms from France was Qatar (9.7 per cent of French arms exports).

China was the fourth largest exporter of arms in 2020–24, with 5.9 per cent of global arms exports. Despite China’s efforts to increase its arms exports, many large importers do not buy Chinese arms for political reasons.

Asia and Oceania remains largest arms-importing region; China’s imports more than halve

The share of global arms transfers going to states in Asia and Oceania fell from 41 per cent to 33 per cent between 2015–19 and 2020–24. A 21 per cent drop in imports to the region was in large part due to arms imports by China shrinking by 64 per cent between the two periods, as it increasingly substituted imports—mainly from Russia—with locally designed and produced weapon systems. China’s arms imports are likely to keep falling as the capacity of its domestic arms industry grows.

Four states in Asia and Oceania ranked among the 10 largest arms importers globally in 2020–24: India, Pakistan, Japan and Australia. China dropped out of the top 10 arms importers for the first time since 1990–94. The main suppliers to the region in 2020–24 were the USA, which accounted for 37 per cent of regional arms imports, Russia (17 per cent) and China (14 per cent).

India was the world’s second largest arms importer, with its imports reflecting perceived threats from both China and Pakistan. However, its imports decreased by 9.3 per cent between 2015–19 and 2020–24. The largest share of Indian arms imports (36 per cent) came from Russia, a significantly smaller share than in 2015–19 (55 per cent) and 2010–14 (72 per cent). Arms imports by Pakistan grew by 61 per cent between 2015–19 and 2020–24. China became even more dominant as its supplier, accounting for 81 per cent of Pakistan’s arms imports in 2020–24, compared with 74 per cent in 2015–19.

With the sharp drop in China’s arms imports, and marked decreases in imports by Taiwan (–27 per cent) and South Korea (–24 per cent), arms imports by East Asian states shrank by 22 per cent between 2015–19 and 2020–24. Japan (+93 per cent) was the only East Asian state that saw an increase in its arms imports.

‘While arms imports to Europe and the Middle East continue to grab media attention, Asia and Oceania remained the largest arms-importing region in the world in 2020–24, as it has been almost invariably since the early 1990s,’ said Siemon Wezeman, Senior Researcher with the SIPRI Arms Transfers Programme. ‘Threat perceptions concerning China are behind much of the arms procurement in the region.’

Middle East arms imports dip

Arms imports by states in the Middle East fell by 20 per cent between 2015–19 and 2020–24. Four of the top 10 global importers in 2020–24 were in the Middle East: Qatar, Saudi Arabia, Egypt and Kuwait. Qatar was the world’s third largest arms importer in 2020–24 (up from 10th largest in 2015–19). Between 2015–19 and 2020–24, Saudi Arabia’s arms imports decreased by 41 per cent.

More than half of arms imports to the Middle East came from the USA (52 per cent), while 13 per cent came from Italy, 9.8 per cent from France and 7.6 per cent from Germany.

‘Regional conflicts and tensions continue to drive demand for arms imports in the Middle East,’ said Zain Hussain, Researcher with the SIPRI Arms Transfers Programme. ‘Given the volume of pending deliveries, the Middle East will remain a major arms-importing region.’

Despite the ongoing war in Gaza, arms imports by Israel remained largely stable between 2015–19 and 2020–24. In 2020–24 the USA supplied the biggest share of Israel’s arms imports (66 per cent), followed by Germany (33 per cent) and Italy (1.0 per cent). Israel was the 15th largest arms importer globally in 2020–24, down from 14th in 2015–19.

‘Israel has received substantial military aid from the USA following the Hamas-led attack on 7 October 2023,’ said Zain Hussain. ‘However, for its recent military operations, Israel has employed mainly US-supplied weapons it had received earlier. Israel’s adversaries Hamas, Hezbollah and the Houthis have relied on Iranian arms, and Hezbollah and the Houthis have used Iranian-supplied missiles and drones against Israel.’

Insecurity and conflict drive large increase in arms imports to West Africa

Arms transfers to West Africa have been rising sharply in the past 15 years as the security situation has deteriorated. The combined arms imports of West African states almost doubled (+82 per cent) between 2010–14 and 2020–24. Nigeria accounted for by far the biggest share (34 per cent) of arms imports to West Africa in 2020–24.

‘The growth in arms imports to West Africa has been striking. While the volume of imports remains relatively small, it has important geopolitical implications,’ said Katarina Djokic, Researcher with the SIPRI Arms Transfers Programme. ‘States like Burkina Faso, Mali and Senegal seem to be rapidly increasing their imports. Arms suppliers are using arms exports to boost their influence in this part of the world, including emerging suppliers—primarily Türkiye—alongside more established actors such as China, France, Russia and the USA.’

Other notable developments

- African arms imports fell by 44 per cent between 2015–19 and 2020–24. This was mainly due to large decreases in imports by Algeria (–73 per cent) and Morocco (–26 per cent). Arms imports by states in sub-Saharan Africa increased by 4.2 per cent.

- Combat aircraft are the main long-range strike weapon imported by states, but interest in long-range land-attack missiles is increasing. In 2020–24 the USA supplied 45 per cent of global long-range land-attack missile exports, delivering them to 7 states, with deliveries to 13 states pending.

- Arms imports by states in the Americas increased by 13 per cent. The USA was the biggest importer in the region (accounting for 3.1 per cent of global arms imports and 50 per cent of imports by states in the Americas).

- Brazil’s arms imports increased by 77 per cent between 2015–19 and 2020–24, and accounted for 49 per cent of all arms imports to South America in 2020–24. The main suppliers to South America in 2020–24 were France (accounting for 30 per cent of South American arms imports), the USA (12 per cent) and the UK (11 per cent).

- North Korea exported artillery and missiles to Russia for use in Ukraine. With this, both states violated the United Nations sanctions on North Korea.