Global Prospects and Policy Uncertainty Test Global Resilience

List of Key Chapter Titles

1. Policy Uncertainty Tests Global Resilience
2. Diverging Growth Momentum Across Countries
3. Cyclical Positions
4. Structural Forces
5. Diminished Policy Space
6. Global Imbalances Stemming from Domestic Imbalances
7. Outlook: A Range of Possibilities
8. Growth Forecasts
9. Inflation Forecasts
10. Medium-Term Prospects
11. Global Trade Outlook
12. Risks to the Outlook: Tilted to the Downside
13. Policy Advice: Navigating Uncertainty and Building Resilience to Ease Macroeconomic Trade-offs

Document Introduction

This report constitutes the core chapter of the International Monetary Fund's (IMF) World Economic Outlook (WEO), published in April 2025. The report is released at a critical juncture for the global economy. Following a prolonged period of unprecedented shocks, signs of stabilization emerged for much of 2024, with inflation receding from multi-decade highs and labor markets gradually normalizing. However, a series of major policy shifts, particularly multiple rounds of tariff measures initiated by the United States since February 2025 and met with countermeasures by other parties, are reshaping the global trading system and have triggered unprecedented policy uncertainty, once again testing the resilience of the global economy. This uncertainty, combined with already slowing economic momentum, subjects the growth outlook to significant downward pressure.

The report is structured rigorously, beginning with an analysis of recent global economic dynamics and divergences. The analysis notes that while global growth has hovered around 3 percent in recent years, close to its potential, there are significant differences in countries' cyclical positions and structural drivers. For example, the U.S. economy had been operating above potential output, but domestic demand is showing signs of fatigue; the euro area is in a cyclical rebound, but consumer sentiment remains subdued; China's economy continues to be affected by prolonged weakness in the real estate sector and trade tensions. Structural factors, such as energy shocks, slowing labor productivity growth, shifts in manufacturing activity, and demographic headwinds, collectively shape countries' growth trajectories. Meanwhile, most countries have depleted significant policy space due to fiscal support during and after the pandemic, with high public debt and rising interest rates posing serious challenges.

Based on policy measures announced as of April 4, 2025 (the "baseline forecast"), the report provides detailed global growth and inflation projections. Global growth is projected to decline from an estimated 3.3 percent in 2024 to 2.8 percent in 2025, before recovering to 3.0 percent in 2026, a significant downward revision from previous forecasts. Growth expectations have been lowered for almost all countries and regions, reflecting both the direct impact of the new trade measures and indirect effects through trade-linkage spillovers, heightened uncertainty, and deteriorating sentiment. Regarding inflation, while a gradual easing is anticipated, the outlook remains highly uncertain, with the specific impact determined by how new tariffs are implemented, firms' pricing behavior, and exchange rate responses.

The report dedicates considerable space to assessing risks to the outlook, clearly stating that overall risks are tilted to the downside in both the near and medium term. The most prominent risks include escalation of trade measures and persistently high policy uncertainty, financial market volatility and adjustments, further increases in long-term interest rates, rising social discontent, and challenges to international cooperation. At the same time, the report also points to upside risks that could lead to more favorable outcomes, such as the conclusion of new-generation trade agreements, de-escalation of conflicts, acceleration of structural reforms, and artificial intelligence (AI) becoming a new engine for growth.

Finally, the report offers a series of navigational recommendations for policymakers. The core lies in reducing policy-induced uncertainty and resolving trade tensions. Regarding monetary policy, careful calibration based on country-specific circumstances is needed to balance anchoring inflation expectations with safeguarding financial stability. Fiscal policy should focus on rebuilding buffers, restoring debt sustainability, while protecting growth and vulnerable groups. Over the medium to long term, growth potential should be unlocked through structural reforms (including in labor markets, regulation, finance, etc.) and climate policies. The report emphasizes that strengthening international cooperation in areas such as international trade, taxation, climate, and development assistance is crucial for sustaining global growth, addressing shared challenges, and mitigating cross-border spillovers.

This report integrates a wealth of real-time data, chart analysis, and model simulations (such as in Boxes 1.1 and 1.2), providing invaluable authoritative analysis and a framework for understanding the current complex global economic situation, assessing the transmission mechanisms of policy shocks, and contemplating potential future evolution paths.