Opinion
Global economy ‘doing better than feared’ despite downside risks
Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026
October 19, 2025 | 12:27 AM
The global economy seems to be "doing better than feared” and has proven "more resilient than expected”, despite acute strains from multiple shocks around the world.According to the International Monetary Fund (IMF), the global economy is "adjusting to a landscape reshaped” by new policy measures. Some extremes of higher tariffs (triggered by US policies) were tempered, thanks to subsequent deals and resets.But the overall environment remains "volatile”, and temporary factors that supported activity in the first half of 2025 — such as front-loading — are "fading”, IMF noted recently.As a result, global growth projections in the latest World Economic Outlook (WEO) are revised upwards relative to the April (2025) WEO but continue to mark a downward revision relative to the pre-policy-shift forecasts.After a resilient start, the global economy is showing signs of a moderate slowdown, as predicted. Incoming data in the first half of 2025 showed robust activity.Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, with advanced economies growing around 1.5% and emerging market and developing economies just above 4%.Inflation is projected to continue to decline globally, though with variation across countries: above target in the United States — with risks tilted to the upside — and subdued elsewhere.Inflation in Asian economies was subdued, while it remained steady in the United States. This apparent resilience, however, seems to be largely attributable to temporary factors — such as front-loading of trade and investment and inventory management strategies — rather than to fundamental strength, the IMF noted.As these factors fade, weaker data are surfacing. The front-loading is unwinding, and labour markets are softening, it said.Pass-through of tariffs to US consumer prices, previously muted, appears increasingly likely. Advanced economies, traditionally reliant on immigration, are seeing sharp declines in net labour inflows, with implications for potential output.On an end-of-year basis, global growth is projected to slow down from 3.6% in 2024 to 2.6% in 2025. Advanced economies are forecast to grow about 1½ percent in 2025–26, with the United States slowing to 2%.On the other hand, the world trade volume is forecast to grow at an average rate of 2.9% in 2025–26 — boosted by front-loading in 2025 yet still much slower than the 3.5% growth rate in 2024 — with persistent trade fragmentation limiting gains.Further escalation of protectionist measures, including non-tariff barriers, could suppress investment, disrupt supply chains, and stifle productivity growth around the world.Larger-than-expected shocks to labour supply, notably from restrictive immigration policies by some Western countries, could reduce growth, especially in economies facing aging populations and skill shortages.The IMF’s global growth forecast (of roughly 3%) over the medium-term, is well below the 3.7% forecast before the Covid-19 pandemic.IMF Managing Director Kristalina Georgieva cited deep undercurrents of marginalisation, discontent and hardship around the world, and said the global economy faced an array of risks, including a potential market bubble around artificial intelligence.Uncertainty is at exceptionally high levels and continuing to climb, while demand for gold — a traditional safe-haven asset — is surging, Georgieva said.Clearly, the IMF has lifted its outlook for global growth this year, flagging a milder-than-expected economic hit, mainly from President Donald Trump’s tariff policies while warning of risks ahead.
October 19, 2025 | 12:27 AM