## World Economic Outlook: A Critical Juncture Amid Policy Shifts — April 2025 (selected text) ## Source details **Canonical URL:** [World Economic Outlook: A Critical Juncture Amid Policy Shifts — April 2025 (selected text)](https://www.imf.org/-/media/files/publications/weo/2025/april/english/text.pdf) ## Other formats - [Markdown version](/-/media/files/publications/weo/2025/april/english/text.pdf.md) - [Structured JSON version](/-/media/files/publications/weo/2025/april/english/text.pdf.json) --- ### Scope, structure, and contributors - Scope and contents: - Chapters: Chapter 1: Global Prospects and Policies; Chapter 2: The Rise of the Silver Economy; Chapter 3: Journeys and Junctions; plus Statistical Appendix, Assumptions, What’s New, Data and Conventions, Country Notes, Classification of Economies, Tables and Figures. - Contributors and editorial direction: - Coordinated under Pierre-Olivier Gourinchas; project directed by Petya Koeva Brooks and Deniz Igan. - Primary contributors listed including Silvia Albrizio, Christian Bogmans, Patricia Gomez-Gonzalez, Bertrand Gruss, and others; editorial team led by Gemma Rose Diaz. ### Assumptions underlying 2025–26 projections - Real effective exchange rates: assumed constant at averages during March 6, 2025–April 3, 2025 (except ERM II participants constant nominally relative to the euro). - Oil prices: - $66.94 a barrel in 2025. - $62.38 a barrel in 2026. - Short-term (3-month) government bond yields: - United States: 4.2 percent in 2025 and 3.5 percent in 2026. - Euro area: 2.2 percent in 2025 and 2.1 percent in 2026. - Japan: 0.5 percent in 2025 and 0.8 percent in 2026. - 10-year government bond yields: - United States: 4.2 percent in 2025 and 3.8 percent in 2026. - Euro area: 2.6 percent in 2025 and 2.7 percent in 2026. - Japan: 1.4 percent in 2025 and 1.6 percent in 2026. - Data vintage: estimates and projections based on information through April 14, 2025; Executive Board discussion occurred on April 11, 2025. ### Trade shock: measures, timing, and immediate effects - Timeline and tariff measures (selected, exact figures preserved): - Jan. 20–Apr. 1 measures include 20 percent tariffs on China; 25 percent tariffs on steel and aluminum; 25 percent tariffs on Mexico and Canada; 10 percent tariff on Canadian energy imports. USMCA carve-out assumed to halve effective tariff increase for Canada and Mexico. - April 2 tariffs: auto sector tariffs and country-specific tariffs, with exemptions per Annex II. - April 9 tariffs: increase in tariffs on China to 145 percent and reduction in other country-specific tariffs to 10 percent; April 11 exemptions on some electronic products. - Aggregate tariff rates and effects as of April 14: - US effective tariff rate on Chinese goods: 115 percent. - China’s rate on US goods: 146 percent. - US effective tariff rate on the world: about 25 percent (up from under 3 percent in January 2025). - Mechanisms: - Tariffs act as a negative supply shock for the tariffing economy and mostly a negative external demand shock for trading partners; complex global value chains magnify effects. - Trade policy uncertainty: - Daily trade policy indicator surged more than four standard deviations in three days after April 2. ### Revisions to trade, growth, and inflation projections (reference forecast) - Global trade volume (goods and services): 3.8 (2024), 1.7 (2025), 2.5 (2026); difference from January 2025 WEO Update: −1.5 (2025), −0.8 (2026). - Reference forecast global growth: - World Output: 3.3 (2024), 2.8 (2025), 3.0 (2026); cumulative downgrade of 0.8 percentage point relative to January 2025 WEO Update. - Advanced economies: 1.8 (2024), 1.4 (2025), 1.5 (2026). - United States: 2.8 (2024), 1.8 (2025), 1.7 (2026); difference from January 2025: −0.9 (2025), −0.4 (2026). - China: 5.0 (2024), 4.0 (2025), 4.0 (2026); difference from January 2025: −0.6 (2025), −0.5 (2026). - Emerging Market and Developing Economies: 4.3 (2024), 3.7 (2025), 3.9 (2026). - Global headline inflation: - World Consumer Prices: 5.7 (2024), 4.3 (2025), 3.6 (2026). - Advanced Economies: 2.6 (2024), 2.5 (2025), 2.2 (2026). - Emerging Market and Developing Economies: 7.7 (2024), 5.5 (2025), 4.6 (2026). - Selected country and regional projections (reference forecast highlights): - Euro area: 0.9 (2024), 0.8 (2025), 1.2 (2026). - Japan: 0.1 (2024), 0.6 (2025), 0.6 (2026). - Mexico: 1.5 (2024), −0.3 (2025), 1.4 (2026). - Brazil: 3.4 (2024), 2.0 (2025), 2.0 (2026). ### Alternative scenarios and model-based forecasts - Scenario framework: - Reference forecast: measures announced as of April 4. - Pre–April 2 forecast: cutoff late March. - Post–April 9 model-based forecast: quantifies implications of April 5–14 announcements. - Post–April 9 model-based forecast outcome (if measures between April 5 and 14 considered permanent in isolation): - Global growth about 2.8 percent for 2025 and about 2.9 percent for 2026. - GIMF scenario simulations (10-region version): - Scenario A (global divergences + trade war + uncertainty + tighter financial conditions): combined effect decreases global GDP by about 1.3 percent by 2025 and 1.9 percent by 2026 (relative to reference); trade war layer reduces world GDP by 0.6 percent by 2027 and by 1 percent in the long term. - Scenario B (policy reforms and positive layers): combined effect increases global output by about 0.4 percent by 2026 (0.8 percent in the long term) and raises global inflation by about 15 basis points. - Key quantified model results (Box 1.2, 10-year horizon, percent deviations from no-tariff forecast): - Real Exports (GIMF; CP; CFRT): United States: –19.3; –21.8; –27.6. China: –5.4; –4.9; –6.7. World (exports): –5.1; –3.1; –4.2. - Real GDP (GIMF; CP; CFRT): United States: –1.3; –0.3; –0.9. China: –1.1; –0.5; –0.7. World: –0.9; –0.2; –0.4. - Short-run GIMF findings: - World activity hit ranges between 0.4 and 1 percent of world GDP by 2027 in alternative specifications; largest negative effects for Canada and Mexico, China, and the United States. ### Risks, channels, and macrofinancial consequences - Downside risks emphasized: - Escalating trade war and higher trade policy uncertainty; probability of 2025 global recession assessed at 37 percent (recession defined as 2025 annual growth below 1.2 percent). - Financial instability from divergent policy stances, asset repricing, and tighter financial conditions—acute for economies with debt distress. - Rising long-term interest rates and debt-service burdens; debt-service as a fraction of fiscal revenue is rising. - Channels: - Tariffs: supply shocks in tariffing countries, demand shocks in tariffed countries; uncertainty reduces investment and credit supply. - US dollar effects: a 10 percent nominal US dollar appreciation produces negative real GDP effects and raises EMDE inflation through bilateral pass-through. - Commodity and conflict shocks: “war tax” on growth can reach 30 percent of GDP and contribute to inflation rates as high as 15 percent (Federle and others 2024); negative spillovers estimated on average between 5 percent and 10 percent of GDP over five to seven years after conflicts. ### Policy prescriptions and priorities - Trade policy: - Restore stability; find mutually beneficial, predictable, rules-based arrangements; address nontariff barriers and trade-distorting measures. - Monetary policy: - Remain ahead of the curve; where tariffs and supply disruptions raise inflation risks, forceful tightening needed; where negative demand shocks dominate, consider lowering policy rates; conditionality on inflation evidence emphasized. - Exchange rate policy: - Allow adjustment when driven by fundamentals; intervene only under IMF Integrated Policy Framework conditions. - Fiscal policy: - Rebuild fiscal space; support for those severely dislocated should be narrowly targeted with automatic sunset clauses; temporary spending financed by debt only in countries with sufficient fiscal space; permanent spending offsets required. - Structural and medium-term growth policies: - Boost total factor productivity; invest in digital infrastructure and skills; harness AI responsibly. - Financial stability: - Activate macroprudential tools; facilitate debt restructuring and market-stabilizing measures when necessary. - Industrial policy guidance: - Avoid broad subsidies; favor narrowly targeted, cost‑benefit–justified programs with careful design and international cooperation to minimize distortions. ### Headline labor, productivity, and fiscal observations - Labor productivity: - Declined in nearly every country besides the United States; capital shallowing explains roughly half of productivity slowdown in advanced economies since 2010 and about a third in EMDEs. - Fiscal positions: - US public debt: 121 percent of GDP in 2024 rising to 130 percent of GDP in 2030 (under current policies). - Euro area debt-to-GDP: 88 percent rising to 93 percent in 2030. - Public debt in EMDEs: current level 70 percent of GDP rising to projected 83 percent in 2030. - Inflation expectations: - Exceed central bank targets in most AEs and EMDEs; risks to anchoring noted. ### Chapter 2 — The Rise of the Silver Economy: demographics and healthy aging - Demographic trends and projections: - Global population growth slows from 1.1 percent per year pre-COVID to basically zero in 2080–2100; average age projected to increase by 11 years between 2020 and end of century. - By 2035 all advanced economies and the largest emerging markets will have crossed their “demographic turning point.” - Empirical healthy-aging findings (microsurvey sample ~1 million individuals, 29 AEs and 12 EMs, 2000–22): - A person who was 70 in 2022 had the same cognitive ability as a 53-year-old in 2000. - Over a decade, observed cognitive improvements associated with: ~20 percentage point increase in likelihood of remaining engaged in the labor market; ~six hours increase in average weekly hours worked; ~30 percent rise in labor earnings conditional on being employed. - Frailty improvements: a 70-year-old in 2022 had frailty similar to a 56-year-old in 2000. - Macroeconomic projections and contributions: - Healthy aging contributes about 0.4 percentage point annually to global GDP growth over 2025–50. - Under current policies, average global annual output growth projected to decline by 1.1 percentage points during 2025–50 compared with 2016–18 average; demographics account for almost three-fourths of this decline. - Five-year-ahead growth forecast: 3.2 percent; historical 2000–19 average: 3.7 percent. - Policy levers and quantified impacts: - Combined labor-supply policies (healthy-aging policies, higher effective retirement ages, closing gender LFP gaps) could boost global annual output growth by about 0.6 percentage point over 2025–50, offsetting almost three-fourths of the demographic drag during that period. - Individual scenarios: healthy-aging policies -> world annual GDP growth about 0.2 percentage point higher over 2025–2100 (0.3 percentage point higher over 2025–50); higher retirement age -> about 0.1 percentage point higher over 2025–2100; closing gender LFP gaps -> 0.1 percentage point higher over 2025–2100 (0.3 percentage point over 2025–50). - Fiscal and pension considerations: - To stabilize age-induced public-debt increases over 75 years, single-instrument reforms required (immediate): Retirement Age +6 years; Replacement Rate −25 percent; Contribution Rate +18 percent. A mix reduces required magnitudes (Mix immediate: Retirement Age +2; Replacement Rate −8.3 percent; Contribution Rate +6 percent). - Earlier reforms materially reduce consumption losses and intergenerational burden. ### AI, electricity demand, emissions, and GDP effects (AI sector feature) - IMF-ENV scenario design (AI-driven IT-sector TFP increases): - Constant annual TFP growth rates: 22 percent (China), 13 percent (United States), 10 percent (Europe). - Electricity supply change in AI scenario (2030, deviations from baseline): - United States: +8 percent (525 TWh). - Europe: +3 percent (145 TWh). - China: +2 percent (237 TWh). - Electricity price changes (2030) — AI scenario under current energy policies: - If power supply responsive: United States +0.9 percent; Europe +0.45 percent; China +0.35 percent. - If renewables scale-up slows and T&D investments not increased: United States up to 8.6 percent; China up to 5.3 percent; Europe up to 3.6 percent. - Macroeconomic and emissions impacts (2030, 2025–30 cumulative): - AI scenario raises average annual global GDP growth by 0.5 percentage point between 2025 and 2030 (current energy policies). - GHG emissions increase in 2030: United States +5.5 percent; Europe +3.7 percent; China +1.2 percent; global average +1.2 percent. - Cumulative global GHG emissions increase 2025–2030: 1.7 Gt (current policies); 1.3 Gt (alternative energy policies). - Using a median social cost of carbon $39 per ton, additional social cost ≈ $50.7 billion to $66.3 billion (1.3 percent to 1.7 percent of the AI-driven increase in real world GDP between 2025 and 2030). - Policy priorities: - Scale up renewables; invest in transmission and distribution; consider feed-in tariffs and other supply-side energy policies to limit carbon intensity and price surges; coordinate government-business policies to realize AI benefits while limiting societal and environmental costs. ### Chapter 3 — Migration, refugees, and policy spillovers - Global stock (as of 2024): legal migrants and refugees 304 million = 3.7 percent of global population; about one in six are refugees or asylum seekers. - Host countries: - About 40 percent of migrants and 75 percent of refugees reside in EMDEs. - Nearly two-thirds of refugees under UNHCR mandate and other people in need of protection come from Afghanistan, Syria, Ukraine, and Venezuela. - Nearly 73 percent of such refugees are hosted in EMDEs. - Empirical spillovers and substitution: - Tighter policies that deter 20 percent of migrant/refugee inflows in one set of destinations lead to almost 10 percent increase in inflows to others over five years. - A 10 percent increase in inflows to an average destination economy (inflows ≈ 2 percent of population) associated with ≈ 0.2 percent increase in output over five years. - Tightening migration that reduces migration by about 4 percent can be partly offset by >25 percent increase in refugee inflows to that economy. - Deflected refugee inflows do not generate meaningful output gains on average unless integration policies are strong. - Fiscal and labor-market effects: - Migrants/refugees are younger: 78 percent of migrants/refugees are working-age vs. 63 percent of natives. - Working-age migrants provide a more positive fiscal boost than nonworking-age migrants; first-generation effects may be weaker but descendants often have more favorable net fiscal impacts. - Modeling and empirical results show modest aggregate wage effects: low-skilled immigration modestly decreases low-skilled native wages by less than 1 percentage point long term; high-skilled immigration can marginally decrease high-skilled native wages by up to 1.5 percentage points long term. - Policy recommendations: - Improve integration (labor market access, recognition of qualifications, language training). - Prioritize productive public investment and private-sector development to absorb inflows. - International cooperation to share hosting burdens and improve long-term outcomes. ### Statistical appendix, conventions, and notable data practices - WEO database coverage: 196 economies; data through April 14, 2025. - Exchange-rate and SDR conversion assumptions: - US dollar–SDR conversion rates: 1.328 (2025), 1.336 (2026). - US dollar–euro conversion rates: 1.077 (2025), 1.083 (2026). - Yen–US dollar conversion rates: 149.2 (2025), 146.1 (2026). - What’s new: - Bolivia projections for 2027–30 omitted due to significant uncertainty. - Ecuador fiscal projections for 2025–30 excluded because of ongoing program discussions. - Country notes and special cases: - Afghanistan, Lebanon, Sudan, Syria, Venezuela, and others have data exclusions or special treatments noted in country-specific entries. - Aggregation rules and composite construction: - Country-group composites represent calculations based on 90 percent or more of the weighted group data unless noted otherwise. - “Billion” = thousand million; “trillion” = thousand billion. “. . .” denotes data not available or not applicable. *Source: Preface, Chapters 1–3, Statistical Appendix excerpts — World Economic Outlook: A Critical Juncture Amid Policy Shifts, International Monetary Fund, April 2025.* ### Preface ### Preface ### Scope and Contents - Presents the structure and chapters of the World Economic Outlook (WEO), including: - Chapter 1: Global Prospects and Policies (Policy Uncertainty Tests Global Resilience; The Outlook: A Range of Possibilities; Risks to the Outlook: Tilted to the Downside; Policies: Navigating Uncertainty and Enhancing Preparedness to Ease Macroeconomic Trade-Offs; Commodity Special Feature: Market Developments and the Impact of AI on Energy Demand). - Chapter 2: The Rise of the Silver Economy: Global Implications of Population Aging. - Chapter 3: Journeys and Junctions: Spillovers from Migration and Refugee Policies. - Statistical Appendix, Assumptions, What’s New, Data and Conventions, Country Notes, Classification of Economies, Tables and Figures listings, and Online Tables—Statistical Appendix. - Lists extensive tables and figures (by title) supporting chapter analysis, projections, and special features. ### Assumptions Underlying the Projections - Real effective exchange rates: assumed constant at their average levels during March 6, 2025–April 3, 2025, except for currencies participating in the European exchange rate mechanism II (assumed to have remained constant in nominal terms relative to the euro). - Established policies of national authorities assumed to be maintained (see Box A1 in the Statistical Appendix for specific fiscal and monetary policy assumptions for selected economies). - Oil price assumptions: - Average price of oil: $66.94 a barrel in 2025. - Average price of oil: $62.38 a barrel in 2026. - Short-term government bond yield assumptions (3-month): - United States: 4.2 percent in 2025 and 3.5 percent in 2026. - Euro area: 2.2 percent in 2025 and 2.1 percent in 2026. - Japan: 0.5 percent in 2025 and 0.8 percent in 2026. - 10-year government bond yield assumptions: - United States: 4.2 percent in 2025 and 3.8 percent in 2026. - Euro area: 2.6 percent in 2025 and 2.7 percent in 2026. - Japan: 1.4 percent in 2025 and 1.6 percent in 2026. - These are described as working hypotheses rather than forecasts; uncertainties around them add to projection margins of error. - Estimates and projections are based on statistical information available through April 14, 2025, but may not reflect the latest published data in all cases. For last data update dates for each economy, refer to the notes in the online WEO database. - Some economies revised projections based on commodity markets and international trade developments as of April 4, 2025 (these economies are listed in Box A2 in the Statistical Appendix). ### Conventions and Definitions - “. . .” indicates data are not available or not applicable. - “–” between years or months (for example, 2023–24 or January–June) indicates the years or months covered, including the beginning and ending years or months. - “/” between years or months (for example, 2023/24) indicates a fiscal or financial year. - “Billion” means a thousand million; “trillion” means a thousand billion. - “Basis points” refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point). - Data refer to calendar years, except for a few countries that use fiscal years (see Table F in the Statistical Appendix for economies with exceptional reporting periods). - For some countries, figures for 2024 and earlier are based on estimates rather than actual outturns (see Table G in the Statistical Appendix for latest actual outturns). - Tables and figures citing “IMF staff calculations” or “IMF staff estimates” draw on data from the WEO database. - When countries are not listed alphabetically, ordering is by economic size. - Minor discrepancies between sums of constituent figures and totals reflect rounding. - Composite data for country groups represent calculations based on 90 percent or more of the weighted group data unless noted otherwise. - Map boundaries, colors, denominations, and other information do not imply IMF judgment on legal status or endorsement. - “Country” and “economy” may cover territorial entities that are not states but for which separate statistical data are maintained. ### What Is New in This Publication - For Bolivia, projections for 2027–30 have been omitted because of significant uncertainty regarding the economic outlook. - For Ecuador, fiscal projections for 2025–30 are excluded from publication because of ongoing program discussions. ### Corrections, Revisions, and Data Practices - Data and analysis compiled by IMF staff at time of publication; efforts made to ensure timeliness, accuracy, and completeness. - When errors are discovered, corrections and revisions are incorporated into digital editions available from the IMF website and the IMF eLibrary; all substantive changes are listed in the online table of contents. - WEO historical data and projections are based on information gathered by IMF country desk officers via missions and ongoing analysis; historical data are updated continually and structural breaks are often adjusted using splicing and other techniques. - IMF staff estimates serve as proxies when complete information is unavailable; WEO data can differ from other official data sources including the IMF’s International Financial Statistics. - WEO data and metadata are provided “as is” and “as available”; corrections and revisions made after publication are incorporated into electronic editions; substantive changes are listed in online tables of contents. - For terms and conditions for usage of the WEO database, refer to IMF Copyright and Usage website. ### Access, Editions, and Further Information - Print copies can be ordered from the IMF bookstore at imfbk.st/555871. - Multiple digital editions (ePub, enhanced PDF, and HTML) are available on the IMF eLibrary at eLibrary.IMF.org/WEO. - Free PDF of the report and data sets for each chart are downloadable from www.IMF.org/publications/weo. - Accompanying publication on the IMF website includes a larger compilation of WEO database data and files containing frequently requested series for use in various software packages. - Inquiries about WEO content and the WEO database: - World Economic Studies Division, Research Department, International Monetary Fund, 700 19th Street, NW, Washington, DC 20431, USA. - Online Forum: www.imf.org/weoforum. ### Data vintage and Editorial Notes - The estimates and projections draw on statistical information through April 14, 2025. - Executive Board discussion of the report occurred on April 11, 2025. - Some economies revised projections based on developments as of April 4, 2025; see Box A2 for details. - Minor discrepancies from rounding noted in tables and figures. ### Contributors and Editorial Direction - Report coordinated in the Research Department under the general direction of Pierre-Olivier Gourinchas, Economic Counsellor and Director of Research. - Project directed by Petya Koeva Brooks, Deputy Director, Research Department, and Deniz Igan, Division Chief, Research Department. - Aqib Aslam, Division Chief, Research Department and Head of the Spillovers Task Force, supervised Chapter 3. - Primary contributors: Silvia Albrizio, Christian Bogmans, Patricia Gomez-Gonzalez, Bertrand Gruss, Shushanik Hakobyan, Eric Huang, Thomas Kroen, Toh Kuan, Andresa H. Lagerborg, Neil Meads, Giovanni Melina, Jean-Marc Natal, Diaa Noureldin, Carolina Osorio Buitron, Galip Kemal Ozhan, Andrea Pescatori, and Sneha Thube. - Other contributors (selected listing preserved as in source): Maryam Abdou, Michal Andrle, Gavin Asdorian, Daniel Baksa, Eric Bang, Sandra Baquie, Suman Basu, Jared Bebee, Paula Beltran, Luisa Calixto, Diego Cerdeiro, Shan Chen, Angela Espiritu, Rebecca Eyassu, Nicolas Fernandez-Arias, Daisuke Fujii, Pedro de Barros Gagliardi, Ganchimeg Ganpurev, Domenico Giannone, Ziyan Han, Da Huu Hoang, Chris Jackson, Nicole Jales, Maximiliano Jerez Osses, Camara Kidd, Jungjin Lee, Weili Lin, Barry Liu, Samuel Mann, Rui Mano, Xiaomeng Mei, Jorge Miranda-Pinto, Joseph Moussa, Dirk Muir, Zsuzsa Munkacsi, Emory Oakes, Manasa Patnam, Clarita Phillips, Carlo Pizzinelli, Rafael Portillo, Shrihari Ramachandra, Diego Rodriguez, Johannes Rosenbusch, Lorenzo Rotunno, Michele Ruta, Marina M. Tavares, Nicholas Tong, Elizabeth Van Heuvelen, Isaac Warren, Evgenia Weaver, Philippe Wingender, Yarou Xu, Rachel Zhang, Canran Zheng, Dian Zhi, and Liangliang Zhu. - Editorial team led by Gemma Rose Diaz (Communications Department) with production and editorial support from Michael Harrup, Lucy Scott Morales, James Unwin, MPS Limited, and Absolute Service, Inc. *Source: Preface, World Economic Outlook: A Critical Juncture Amid Policy Shifts (WEO), International Monetary Fund, April 2025.* ### PREFACE ### PREFACE ### Context and production - The April 2025 World Economic Outlook (WEO) was completed under exceptional circumstances following the April 2 Rose Garden announcement, which forced the team to jettison nearly finalized projections and compress a production cycle that usually takes more than two months into less than 10 days. - Work led by Petya Koeva Brooks, Deputy Director in the Research Department, and her team, with contributions from over 190 country teams within the IMF, revised country projections until the very last minute. - The report presents a “reference forecast” based on information available as of April 4, 2025 (including the April 2 tariffs and initial responses), complemented with a range of global growth forecasts under different trade policy assumptions. ### Trade shock: measures, scope, and immediate effects - Since the January 2025 WEO Update, the United States announced multiple waves of tariffs, culminating on April 2 with a set of nearly universal tariffs and bringing US and global tariff rates to centennial highs. - Tariff specifics noted in the source: - Jan. 20–Apr. 1 measures include 20 percent tariffs on China; 25 percent tariffs on steel and aluminum; 25 percent tariffs on Mexico and Canada; and a 10 percent tariff on Canadian energy imports. A United States–Mexico–Canada Agreement (USMCA) carve-out is assumed to halve the effective tariff increase for Canada and Mexico. - April 2 tariffs include auto sector tariffs and country-specific tariffs, applying exemptions provided in Annex II of the Executive Order per IMF staff judgment. - April 9 tariffs include an increase in the tariffs on China to 145 percent and a reduction in other country-specific tariffs to 10 percent; it also includes exemptions on some electronic products announced on April 11. - The combination of measures and countermeasures has hiked US and global tariff rates to centennial highs and sharply increased policy uncertainty. - Tariffs act as: - A negative supply shock for the tariffing economy (resources reallocated toward noncompetitive goods, loss of aggregate productivity, higher production costs and prices, reduced competition, weaker incentives to innovate, opportunities for rent seeking). - For trading partners, mostly a negative external demand shock (foreign customers driven away; some countries could benefit from rerouting of trade flows). - Modern complex global supply chains magnify effects: most traded goods are intermediate inputs that traverse countries multiple times, so sectoral disruptions can propagate with potentially large multiplier effects. - The uncertainty around trade policy depresses the outlook by causing firms to pause or reduce investment and purchases, and by prompting financial institutions to reevaluate credit supply—an outcome that combines with tighter financial conditions into a global negative demand shock. - The effect of tariffs on exchange rates is not straightforward: - The US may see currency appreciation reflecting reduced demand for foreign currency as imports decline and potential easier policy abroad. - Greater policy uncertainty, lower US growth prospects, and adjustments in global demand for dollar assets can weigh on the dollar, as observed immediately after the announcements. - In the medium term the dollar may depreciate in real terms if tariffs translate into lower productivity in the US tradables sector relative to trading partners. ### Revisions to trade and growth projections - Global trade growth projection for 2025 revised down by 1½ percentage points this year, with a slight recovery penciled in for 2026. - Reference forecast global growth: - Projected to drop to 2.8 percent in 2025 and 3 percent in 2026—down from 3.3 percent for both years in the January 2025 WEO Update, corresponding to a cumulative downgrade of 0.8 percentage point, and much below the historical (2000–19) average of 3.7 percent. - Regional and country projections in the reference forecast: - Advanced economies growth: 1.4 percent in 2025. - United States growth: 1.8 percent in 2025, a pace that is 0.9 percentage point lower relative to the projection in the January 2025 WEO Update. - Euro area growth: 0.8 percent in 2025, expected to slow by 0.2 percentage point relative to January projections. - Emerging market and developing economies growth: 3.7 percent in 2025 and 3.9 percent in 2026, with significant downgrades for countries affected most by recent trade measures, such as China. - Global headline inflation: - Expected to reach 4.3 percent in 2025 and 3.6 percent in 2026, with notable upward revisions for advanced economies and slight downward revisions for emerging market and developing economies in 2025. ### Risks, channels, and economic dynamics - Intensifying downside risks dominate the outlook: - Ratcheting up a trade war and higher trade policy uncertainty could further reduce near- and long-term growth, with eroded policy buffers weakening resilience to future shocks. - Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets, sharp adjustments in foreign exchange rates and capital flows, and broader financial instability, especially for economies already facing debt distress. - Broader financial instability may damage the international monetary system. - Demographic shifts and a shrinking foreign labor force may curb potential growth and threaten fiscal sustainability. - Depleted policy space and dim medium-term growth prospects could reignite social unrest. - More limited international development assistance may increase pressure on low-income countries, pushing them deeper into debt or necessitating significant fiscal adjustments. - Observed economic developments and momentum: - Global growth hovered around 3 percent in the past few years; global output came close to potential prior to these shocks. - Inflation, down from multidecade highs, had been gradually declining toward central bank targets but progress on disinflation has mostly stalled with inflation edging upward in some cases. - Labor markets normalized with unemployment and vacancy rates returning to prepandemic levels in many countries, but hiring has slowed and layoffs have risen since the renewed uncertainty. - Trade held up through late 2024 largely because of increased Chinese exports and US imports that front-loaded ahead of anticipated tariffs. ### Policy prescriptions and priorities - The report emphasizes prudence, clarity, and increased collaboration through the following policy priorities: 1. Trade policy: restore stability and find mutually beneficial trade arrangements; businesses need predictability and the global economy needs a well-functioning rules-based trading system that addresses gaps such as pervasive nontariff barriers and trade-distorting measures. 2. Monetary policy: remain ahead of the curve; where tariffs and supply-chain disruptions create steeper inflation-output trade-offs, forceful tightening will be needed; where negative demand shocks dominate, policy rates may need to be lowered; credibility of the monetary policy framework and central bank independence remain key. 3. Exchange rate policy: allow currencies to adjust when movements are driven by fundamental policy forces; consider intervention only under the conditions outlined in the IMF’s Integrated Policy Framework. 4. Fiscal policy: face starker trade-offs amid high debt, low growth, and rising financing costs; support for those severely dislocated by trade policy should be narrowly targeted and include automatic sunset clauses; temporary parts of additional spending may be financed by debt only in countries with sufficient fiscal space, while new permanent spending should be offset by spending cuts elsewhere or stronger domestic revenue mobilization. 5. Structural and medium-term growth policies: boost total factor productivity by addressing deep-seated structural constraints and harness technological breakthroughs (including generative artificial intelligence) responsibly through investments in digital infrastructure and skills. 6. Financial stability: activate macroprudential tools as needed to contain the buildup of vulnerabilities and provide support in stress events; facilitate debt restructuring and measures to stabilize markets where necessary. - Additional recommendations: - Countries should work constructively to promote a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges. - Restore fiscal space and put public debt on a sustainable path through credible medium-term fiscal consolidation plans while meeting critical spending needs to ensure national and economic security. - Structural reforms in labor, product, and financial markets should complement efforts to reduce debt and narrow cross-country disparities. ### Analytical focus and chapters referenced - Chapter 1 discusses the variety of possible paths for the global outlook given trade policy unpredictability and details channels and scenarios. - Chapter 2—“The Rise of the Silver Economy”—examines demographic headwinds for growth and public finances and the role of “healthy aging,” labor force participation, and gender gaps in offsetting aging impacts. - Chapter 3—“Journeys and Junctions”—explores migration policy spillovers from destination to origin, transit, and bordering economies, highlighting impacts on emerging market and developing economies and the importance of integration policies to minimize skills mismatches and infrastructure pressures. *International Monetary Fund | April 2025* ### 1. Headline Inflation ### 1. Headline Inflation ### Inflation Levels and Measures - Panels plot medians for a sample of 57 economies that accounts for 78 percent of World Economic Outlook world GDP (in weighted purchasing-power-parity terms) in 2024. - Vertical axes are cut off at –2 percent and 12 percent. - “Core inflation” is defined as the percent change in the consumer price index for goods and services, excluding food and energy (or the closest available measure). - AEs = advanced economies; EMDEs = emerging market and developing economies. ### Recent Dynamics Highlighted in Figures - Figures show headline and core inflation medians and the 25th to 75th percentile bands across economies through Mar. 25, with time series from Jan. 2018 to Mar. 25. - Labeled series include Latest, Lowest point, End of 2019, and Peak where applicable. ### Key Observations - Inflation deviation in Figure 1.6 panel 1 is defined as the difference between 2025:Q1 inflation and the central bank’s inflation target. - Output gap referenced is the 2024 output gap. --- ### Labor Markets (Figure 1.2) - Unemployment rates and vacancy-to-unemployment ratios are plotted (percent and ratio scales). - Notes: - India’s unemployment (urban areas) from Periodic Labour Force Survey data. - “Lowest point” spans March 2019 to the latest available data. - “Peak” spans January 2020 to the latest available data. - Europe in panel 2 includes a specified list of European countries. - EA = euro area. --- ### Growth Performance and Forecasts (Figure 1.3) - Panel 1: Real GDP growth (percent) series by region: World, EMDEs, Euro area, AEs, US, China. - Panel 2: Global output gap (percent). - Note: AEs = advanced economies; EMDEs = emerging market and developing economies. --- ### Country and Regional Divergences - European divergence driven by sectoral differences, particularly sectors affected by the energy shock, notably Germany versus Spain. - China’s prolonged weakness in the real estate sector and related effects on local government finances have depressed domestic demand. - Consumer confidence in China plunged in early 2022 and has not recovered (Figure 1.7). - Rising trade tensions and new tariffs have disproportionately affected the Chinese economy. - Rebalancing from investment and net exports toward consumption in China has paused amid deflationary pressures and high household saving; construction and real estate activity remain subdued while industry, trade, and transport have been robust. --- ### Structural Forces and Scarring - Cross-country differences reflect interaction of cyclical and structural factors; differences may narrow as cyclical forces dissipate but may not disappear. - Compared with prepandemic trend, most economies have made up some pandemic damage (Figure 1.8); the United States is an outlier with less scarring. - Energy shock (post Russia’s invasion of Ukraine) had large effects on commodity importers and European economies exposed to natural gas disruption (Figure 1.9 panels 1–3). - The United States transitioned from a net energy importer to a net energy exporter, partly insulating it from commodity market disruptions. --- ### Productivity, Investment, and Industry (Figures 1.10–1.11) - Labor productivity growth declined in recent years in nearly every country besides the United States (Figure 1.10 panel 1). - Relative strength in US labor productivity reflects stronger investment (Figure 1.10 panel 2). - Capital shallowing due to chronic investment weakness can explain roughly half of the productivity growth slowdown in advanced economies since 2010 and about a third of that in emerging market and developing economies (citing Fernald and Li 2023; Igan and others 2024). - Greater labor market flexibility and job-to-job transitions in the United States explain a large share of productivity growth since 2020 (citing Dao and Platzer 2024). Countries with furlough programs typically experienced slower productivity growth. - Industrial production plunged in all countries at the onset of the pandemic; recovery paths differ: - Production soared in China and expanded in smaller EU economies and the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, Thailand). - Production struggled to return to prepandemic levels in Japan and the largest EU countries. - Industrial production in the United States has recovered and outperformed advanced-economy peers (Figure 1.11). - Demographic headwinds: many countries are crossing demographic turning points with declining shares of working-age population (Germany, Italy, Japan, China noted); the United States has strong immigration flows cushioning the effect. --- ### Diminished Policy Space and Fiscal Positions - Much of available policy space has been exhausted in many countries after pandemic and energy/food price shocks. - Fiscal measures sharply increased debt-to-GDP ratios; budget deficits remain large. - Fiscal space is much tighter than a decade ago and the fiscal adjustment required to stabilize debt ratios is at a historic high (Figure 1.12 panel 1). ### Debt Service and Interest Rates - Debt service as a fraction of fiscal revenue is rising (Figure 1.12 panel 2); heterogeneous increases reflect differences in fiscal stances, growth, inflation, and debt maturity structures. - Effective rates likely to surpass prepandemic levels as debt rolls over, notably for low-income countries and some EMDEs. - Real long-term government bond yields have been on the rise after more than a decade of very low rates, surging significantly in recent months (Figure 1.12 panel 3). - Higher long-term rates persist even as monetary policy cycles turn, owing to a global rise in term premiums; US factors included increased issuances, higher expected inflation, and risk premiums, with moderation mid-January followed by renewed increases after tariff announcements. ### Inflation Expectations and Market Sensitivities - Inflation expectations now exceed central bank targets in most advanced economies and EMDEs; group averages between 2017 and 2021 were at or below target. - Yields remain sensitive to inflation surprises and diminishing fiscal space (April 2025 GFSR). - In economies near potential output and facing inflationary pressures from new trade policies and exchange rate movements, central banks have less leeway to “look through” supply shocks. --- ### Global Imbalances and Trade Reallocation - Rising geopolitical tensions and widening domestic imbalances—weak demand in China and strong demand in the United States—have renewed concerns about global imbalances (Gourinchas and others 2024). - International trade as percent of world GDP broadly stable, but structural changes: more trade occurring within historically aligned blocs rather than between them (October 2024 WEO). - Since 2016–17, China and the United States have diversified trading partner bases and decoupled from each other in export and import linkages (Figure 1.14). - Microeconomic supply-chain rerouting and production relocalization have reallocated trade within emerging markets in Asia, increasing import origination for the United States and both import and export linkages for China. - Europe’s trade exposure to both China and the United States has increased due to shifting demand patterns (Europe imports more from China and from the United States in energy; Europe exports more to the United States in other sectors). --- *Source: IMF — World Economic Outlook: A Critical Juncture Amid Policy Shifts (text — 1. Headline Inflation), April 2025.* ### 1. Cross-Country Inflation Expectations ### 1. Cross-Country Inflation Expectations ### Cross-country inflation expectations and consensus forecasts - Panel summary (sample and presentation): - Sample in panel 1 includes 30 advanced economies (AEs) and 31 emerging market and developing economies (EMDEs). - Boxplot elements: horizontal lines = medians; box limits = third and first quartiles; whiskers = maximum and minimum within 1.5 times the interquartile range. - “One year” in panel 2 is based on March 2025 data. Data labels use ISO country codes. EA = euro area. - Visual finding (from figures): - Cross-country deviations from central bank targets are shown in percentage point deviation from target, next 12 months. - Consensus inflation expectations (deviation from central bank target) are plotted for a set of economies including JPN, ZAF, KOR, FRA, AUS, USA, DEU, ITA, EA, CAN, GBR, IND, BRA, MEX, EU, China and regional aggregates (Emerging Asia, LAC, Russia). ### Key implications - Inflation expectations are presented relative to central bank targets for the next 12 months (March 2025-based one-year expectations), indicating heterogeneity across AEs and EMDEs and the need to monitor anchoring of expectations by jurisdiction. ### Selected numerical indicators from related WEO content (context for inflation outlook) - World Consumer Prices: - World: 5.7 (2024), 4.3 (2025), 3.6 (2026) - Advanced Economies: 2.6 (2024), 2.5 (2025), 2.2 (2026) - Emerging Market and Developing Economies: 7.7 (2024), 5.5 (2025), 4.6 (2026) - Assumed inflation rates for 2025 and 2026 used in projections (selected): - Euro area: 2.1 percent and 1.9 percent - Japan: 2.4 percent and 1.7 percent - United States: 3.0 percent and 2.5 percent ### Note on data sources - Sources include central bank websites; Consensus Economics; Haver Analytics; and IMF staff calculations. --- ### Changes in Trade Composition (Figure 1.14) - Change in export shares by destination (percentage points, change in trade shares, 2023–24 minus 2016–17): - Notable values shown: 12.2 and −17.5 for selected destination pairs (labels in figure). - Destinations shown include EU, US, Canada, Mexico, China, Vietnam. - Change in import shares by origin (percentage points, change in trade shares, 2023–24 minus 2016–17): - Notable values shown: 9.8 and −7.7 for selected origin pairs (labels in figure). - Origins shown include EU, US, Canada, Mexico, China, Vietnam. - Sources: IMF, Direction of Trade Statistics; and IMF staff calculations. - Note: “Emerging Asia” excludes China and “LAC” excludes Mexico. --- ### Major global developments and imbalances ### Global current account and net international investment positions - Global current account balances (sums of absolute surpluses and deficits) declined from 2022 peaks but remain larger than pre-pandemic averages. - US current account deficit is larger than in the late 2010s. - Net international investment positions: US net asset position resumed a downward trend in 2023 after a brief increase in 2022 (cited: April 2025 GFSR). - Decline drivers: US equity prices increased more than foreign equity prices and rising foreign purchases of US bonds. - FDI flows have concentrated toward the United States (Figure 1.15, panel 1). ### Exchange rates and capital flows - US dollar: - Appreciated sharply before the US elections in November 2024; lost all gains achieved in Q4 2024 since February 2025 (Figure 1.15, panel 2). - Initial depreciation pressures stronger for EMDE currencies; pressures dissipated following softening in 2025 (Figure 1.15, panel 3). - Since April 2, global risk appetite declined substantially, inducing offsets to appreciation of emerging market currencies. --- ### The Outlook: Scenarios and assumptions ### Scenario framework used in this WEO - Three growth projections presented: - Reference forecast: based on measures announced as of April 4 (presented in tables and WEO database). - Pre–April 2 forecast: cutoff late March; incorporates prior policy announcements and developments since October 2024. - Post–April 9 model-based forecast: quantifies implications of announced pauses, additional exemptions, and escalating tariff rates between China and the United States. ### Global assumptions (selected, exact figures preserved) - Commodity price projections for 2025: - Overall fuel commodities: decrease in 2025 by 7.9 percent. - Oil prices: 15.5 percent decline in 2025. - Coal prices: 15.8 percent drop in 2025. - Natural gas prices: 22.8 percent increase in 2025 (driven by colder-than-expected weather and halt of Russian gas flow to Europe through Ukraine since January 1). - Nonfuel commodity prices: increase by 4.4 percent in 2025. - Projected food and beverage prices have been revised upward compared with January 2025 WEO Update. - Monetary policy projections: - United States federal funds rate projected to be down to 4 percent at the end of 2025 and reach long-term equilibrium of 2.9 percent at the end of 2028. - Euro area: 100 basis points in cuts expected in 2025 (three cuts already occurred this year), bringing policy rate to 2 percent by the middle of the year. - Japan: policy rates expected to be lifted at a similar pace as assumed in October 2024, gradually rising toward a neutral setting of about 1.5 percent; Bank of Japan’s 2 percent inflation target referenced. - Fiscal policy projections: - Advanced economies on average expected to tighten in 2025–26 and, to a lesser extent, in 2027. - United States: general government structural-fiscal-balance-to-GDP ratio expected to improve by 1 percentage point in 2025. - Under current policies, US public debt: 121 percent of GDP in 2024 rising to 130 percent of GDP in 2030. - Euro area debt-to-GDP ratio expected to increase from 88 percent to 93 percent in 2030. - Emerging market and developing economies: primary fiscal deficits projected to widen in 2025 by 0.3 percentage point on average, followed by tightening starting in 2026. - China: structural-fiscal-balance-to-GDP ratio expected to deteriorate by 1.2 percentage points in 2025. - Public debt in EMDEs: current level of 70 percent of GDP rising to a projected 83 percent in 2030. - Trade policy assumptions and measures (selected chronological and quantitative details preserved): - Tariff announcements between February 1 and April 4 with implementation details included in the reference forecast. - United States: - Executive orders on February 1 imposed tariffs on Canada, China, and Mexico. - 10 percent additional tariff on all imports from China effective February 4; another 10 percent imposed on March 4. - 25 percent tariffs on all nonenergy goods imports from Canada (for energy, 10 percent) and 25 percent on all imports from Mexico took effect on March 4, with exemption for USMCA-compliant goods. - Expanded tariffs on steel and aluminum effective March 12: removed all exemptions to 25 percent tariff on steel; increased aluminum tariff from 10 to 25 percent. - March 26 announced 25 percent tariff on all automobiles and auto parts (excluding US content in auto and auto parts exports); came into effect April 3 for autos, implementation for auto parts postponed to May 3. - US Fair and Reciprocal Plan introduced on April 2: 10 percent minimum tariff on all countries other than Canada and Mexico and country-specific rates as high as 50 percent for roughly 60 countries. Universal 10 percent minimum tariff took effect on April 5; other tariffs set to take effect on April 9. Exemptions for critical goods (pharmaceuticals, semiconductors, energy, certain minerals). - Canada: - Announced 25 percent countertariffs on roughly 40 percent of Canadian imports of goods from the United States; countermeasures announced on April 3 included 25 percent tariffs on non-USMCA-compliant fully assembled vehicles imported from the United States. - China: - Responded with tariffs of 10 to 15 percent on select US agricultural products, energy commodities, and farm equipment effective February 10, and tariffs on agricultural products effective March 10. - Announced 34 percent tariffs on April 4, matching increase in US duties on imports from China, to take effect on April 10. - Post–April 4 developments (April 5–14, cutoff April 14): - On April 9 the United States announced a 90-day pause on higher tariff rates on some countries but maintained the 10 percent minimum and further raised tariffs on Chinese goods; China countered again. - EU responded with 25 percent tariffs on a range of US imports, paused for 90 days. - April 11: United States exempted smartphones, laptops, and other electronic devices and components from April 2 tariffs; China raised tariffs on US goods further with higher rate effective April 12. - As of April 14 (cutoff date): US effective tariff rate on Chinese goods was 115 percent; China’s rate on US goods was 146 percent; US effective tariff rate on the world stood at about 25 percent, up from under 3 percent in January 2025. - Trade policy uncertainty: - Daily trade policy indicator (Caldara and others 2020) surged more than four standard deviations in just three days after April 2. --- ### Growth forecasts and alternatives ### Reference forecast (tables and headline projections) - Global growth (reference forecast): - World Output: 3.3 (2024), 2.8 (2025), 3.0 (2026) - Difference from January 2025 WEO Update: −0.5 (2025), −0.3 (2026) - Difference from October 2024 WEO: −0.4 (2025), −0.3 (2026) - Advanced Economies: - 1.8 (2024), 1.4 (2025), 1.5 (2026); differences from January 2025: −0.5 (2025), −0.3 (2026) - Selected country projections (reference forecast): - United States: 2.8 (2024), 1.8 (2025), 1.7 (2026); differences from January 2025: −0.9 (2025), −0.4 (2026) - China: 5.0 (2024), 4.0 (2025), 4.0 (2026); differences from January 2025: −0.6 (2025), −0.5 (2026) - India (fiscal year basis): 6.5 (2024), 6.2 (2025), 6.3 (2026); differences from January 2025: −0.3 (2025), −0.2 (2026) - Euro Area: 0.9 (2024), 0.8 (2025), 1.2 (2026) - Germany: −0.2 (2024), 0.0 (2025), 0.9 (2026) - Japan: 0.1 (2024), 0.6 (2025), 0.6 (2026) - United Kingdom: 1.1 (2024), 1.1 (2025), 1.4 (2026) - Brazil: 3.4 (2024), 2.0 (2025), 2.0 (2026) - Mexico: 1.5 (2024), −0.3 (2025), 1.4 (2026) - Emerging Market and Developing Economies: - 4.3 (2024), 3.7 (2025), 3.9 (2026); differences from January 2025: −0.5 (2025), −0.4 (2026) - World trade volume (goods and services): 3.8 (2024), 1.7 (2025), 2.5 (2026); difference from January 2025: −1.5 (2025), −0.8 (2026) ### Alternative forecasts given trade-policy uncertainty - Pre–April 2 forecast (cutoff late March): - Global growth: 3.2 percent for both 2025 and 2026 (lower by 0.1 percentage point in each year compared with January 2025 WEO Update). - Predicated on higher oil prices and only trade policies announced between February 1 and March 12. - Post–April 9 model-based forecast (incorporates April 5–14 announcements not in reference forecast): - If measures announced between April 5 and 14 are considered permanent in isolation from market fallout and uncertainty, global growth would be about 2.8 percent for 2025 and about 2.9 percent for 2026. - Outcome: similar overall global growth to the reference forecast but with different country composition—poorer outcomes in China and the United States that propagate through supply chains; gains in some countries offset, with losses growing in 2026 and beyond. ### Growth forecast narrative - Near term (reference): global growth projected to fall from an estimated 3.3 percent in 2024 to 2.8 percent in 2025, before recovering to 3.0 percent in 2026. - Revisions: This is lower than January 2025 WEO Update by 0.5 percentage point for 2025 and 0.3 percentage point for 2026. - Downgrades are broad-based, reflecting direct effects of new trade measures and indirect effects via trade-linkage spillovers, heightened uncertainty, and deteriorating sentiment. - Illustrative model simulations (Box 1.2 referenced) show tariff impacts vary by trade relationships, industry composition, policy responses, and trade diversification; fiscal support in some cases offsets negative impacts (examples cited: China, euro area). --- *Italic: Source — IMF staff estimates and calculations, World Economic Outlook: April 2025 (chapters, figures, and tables cited from the provided text).* ### 1.8 percent in 2024 to 1.4 percent in 2025 and ### 1.8 percent in 2024 to 1.4 percent in 2025 and ### Global and Aggregate Growth Projections - World output: 2.8 percent in 2024, 2.3 percent in 2025, 2.4 percent in 2026. - Advanced Economies: 1.8 percent in 2024, 1.4 percent in 2025, 1.5 percent in 2026. - Emerging Market and Developing Economies: 4.1 percent in 2024, 3.5 percent in 2025, 3.7 percent in 2026. - Emerging and Developing Asia: 5.2 percent in 2024, 4.3 percent in 2025, 4.4 percent in 2026. - Emerging and Developing Europe: 3.3 percent in 2024, 2.1 percent in 2025, 2.3 percent in 2026. - Latin America and the Caribbean: 2.2 percent in 2024, 1.9 percent in 2025, 2.2 percent in 2026. - Middle East and Central Asia: 2.0 percent in 2024, 2.9 percent in 2025, 3.6 percent in 2026. - Sub-Saharan Africa: 3.7 percent in 2024, 3.7 percent in 2025, 4.2 percent in 2026. - European Union (memorandum): 1.0 percent in 2024, 1.0 percent in 2025, 1.4 percent in 2026. - Middle East and North Africa (memorandum): 1.6 percent in 2024, 2.7 percent in 2025, 3.5 percent in 2026. - Emerging Market and Middle-Income Economies (memorandum): 4.2 percent in 2024, 3.5 percent in 2025, 3.6 percent in 2026. - Low-Income Developing Countries (memorandum): 3.9 percent in 2024, 4.2 percent in 2025, 5.3 percent in 2026. ### Revisions vs. January 2025 WEO Update (selected) - Global: –0.6 (2025) and –0.4 (2026). - Advanced Economies: –0.6 (2025) and –0.3 (2026). - Emerging Market and Developing Economies: –0.6 (2025) and –0.4 (2026). - Emerging and Developing Asia: –0.6 (2025) and –0.5 (2026). - Latin America and the Caribbean: –0.6 (2025) and –0.4 (2026). - Middle East and Central Asia: –0.8 (2025) and –0.4 (2026). - Sub-Saharan Africa: –0.4 (2025) and 0.0 (2026). - European Union (memorandum): –0.3 (2025) and –0.2 (2026). ### Country and Regional Highlights - United States: - Growth projected to decrease in 2025 to 1.8 percent. - This is 1 percentage point lower than the rate for 2024 and 0.9 percentage point lower than the forecast in the January 2025 WEO Update. - Downward revision driven by greater policy uncertainty, trade tensions, and softer demand from slower-than-anticipated consumption growth. - Tariffs expected to weigh on growth in 2026, projected at 1.7 percent. - Euro area: - Growth projected to decline to 0.8 percent in 2025, then pick up to 1.2 percent in 2026. - Drivers: rising uncertainty and tariffs in 2025; stronger consumption and projected fiscal easing in Germany support modest pickup in 2026. - Spain: 2025 projection 2.5 percent, upward revision of 0.2 percentage point from January 2025 WEO Update (carryover from 2024 and flood reconstruction). - Canada: - Growth forecasts revised downward by 0.6 percentage point for 2025 and by 0.4 percentage point for 2026. - Largely reflects new tariffs on exports to the United States (effective in March) and heightened uncertainty and geopolitical tensions. - Japan: - 2025 growth projection 0.6 percent, downgraded by 0.5 percentage point relative to January forecast. - Tariffs announced on April 2 and associated uncertainty offset expected strengthening of private consumption. - United Kingdom: - 2025 growth projection 1.1 percent, lower by 0.5 percentage point compared with January forecast. - Factors: smaller carryover from 2024, recent tariff announcements, increase in gilt yields, weaker private consumption amid higher inflation from regulated prices and energy costs. - China: - 2025 GDP growth revised downward to 4.0 percent from 4.6 percent (January 2025 WEO Update). - 2026 growth revised downward to 4.0 percent from 4.5 percent. - Revisions reflect recently implemented tariffs offsetting stronger carryover from 2024 and fiscal expansion. - India: - 2025 growth forecast 6.2 percent, 0.3 percentage point lower than January 2025 WEO Update. - Supported by private consumption, particularly in rural areas. - Mexico: - Growth downgraded by 1.7 percentage points for 2025 and 0.6 percentage point for 2026. - Reasons: weaker-than-expected activity in late 2024 and early 2025, tariffs imposed by the United States, associated uncertainty, geopolitical tensions, and tightening financing conditions. - Russia: - Growth projected to drop from 4.1 percent in 2024 to 1.5 percent in 2025 and to 0.9 percent in 2026. - Slight upward revision for 2025 relative to January 2025 WEO Update due to stronger-than-expected 2024 outturns. - Türkiye: - Growth projected to bottom out at 2.7 percent in 2025 and accelerate to 3.2 percent in 2026 (owing to recent pivots in monetary policy). - Middle East and Central Asia: - Projected to accelerate from 2.4 percent in 2024 to 3.0 percent in 2025 and to 3.5 percent in 2026. - Projection revised downward versus January due to more gradual resumption of oil production, persistent spillovers from conflicts, and slower-than-expected progress on structural reforms. - Sub-Saharan Africa: - Growth expected to decline from 4.0 percent in 2024 to 3.8 percent in 2025 and recover to 4.2 percent in 2026. - Nigeria: downward revision of 0.2 percentage point for 2025 and 0.3 percentage point for 2026 (lower oil prices). - South Africa: downward revision of 0.5 percentage point for 2025 and 0.3 percentage point for 2026. - South Sudan: downward revision of 31.5 percentage points for 2025 due to delayed resumption of oil production from a damaged pipeline. ### Inflation Forecast - Global headline inflation: expected to decline to 4.3 percent in 2025 and to 3.6 percent in 2026. - Advanced economies inflation: converges back to target earlier, reaching 2.2 percent in 2026. - Emerging market and developing economies inflation: declines to 4.6 percent in 2026. - Revisions since January 2025 WEO Update: - Global inflation forecast: slightly higher than January. - Advanced economies: 2025 inflation revised upward by 0.4 percentage point since January. - United Kingdom: 2025 inflation revised upward by 0.7 percentage point (one-off regulated price changes). - United States: 2025 inflation revised upward by 1.0 percentage point (stubborn services price dynamics, uptick in core goods prices, supply shock from tariffs). - Emerging and developing Asia: 2025 inflation revised downward by 0.5 percentage point since January; China inflation expected to remain subdued. - Emerging and developing Europe: upward revisions for Russia and Ukraine for 2025 and Russia for 2026, contributing to overall revisions of 1.5 percentage points in 2025 and 1.0 percentage point in 2026 for the subregion. - Latin America and the Caribbean: overall revision for 2025 to –0.3 percentage point (upward revisions for Bolivia, Brazil, Venezuela offset by downward revisions for Argentina and elsewhere). - Uncertainty factors: - Impact of recently imposed tariffs on inflation depends on perceived temporariness, firm margin adjustments, and invoicing currency. - Tariffs act as supply shocks in tariffing countries and demand shocks in tariffed countries; trade uncertainty can reduce investment and spending, amplifying effects via tighter financial conditions and exchange rate volatility. - Potential for tariff-driven inflation through higher import prices, US dollar appreciation, high inflation expectations, and restrictions on commodities with concentrated production. ### World Trade, Current Accounts, and Medium-Term Outlook - World trade growth: expected to slow to 1.7 percentage point in 2025. - This is a downward revision of 1.5 percentage point since the January 2025 WEO Update. - Drivers: increased tariff restrictions and waning cyclical factors that supported recent goods trade growth. - Global current account balances: expected to narrow somewhat over the medium term after widening in 2024. - Creditor and debtor stock positions estimated to have increased in 2024 and are expected to moderate slightly over the medium term. - Some economies face large gross external liabilities from a historical perspective, posing external stress risks. - Medium-term growth: - Five-year-ahead growth forecast: 3.2 percent. - Historical average during 2000–19: 3.7 percent. - Sluggish medium-term dynamics more evident among emerging market and developing economies, implying slower income convergence. - Demographics (population aging) cited as a key driver weighing on productivity, labor force participation, and growth; population movements could help alleviate demographic drag. ### Risks to the Outlook (tilted to the downside) - Escalating trade measures and prolonged trade policy uncertainty: - A trade war would negatively affect World GDP; magnitude varies across countries, with directly targeted countries (notably China and the United States) and many Asian and European countries most affected in the medium term. - Some countries could benefit by consolidating trade networks and reconfiguring global value-chain positions, but adverse effects may accumulate depending on policy responses, domestic reorientation speed, and countermeasures. - Potential fragmentation of FDI flows and negative long-term effects from relocation, technological decoupling, resource misallocation, and financial stability risks. - Inflationary pressures from trade conflict: - Could rise via higher import prices, US dollar appreciation, elevated inflation expectations, and commodity restrictions. - Distributional effects: tariffs tend to raise prices of tradables disproportionately affecting poor households and the retired; may increase returns to capital over labor. - Prolonged policy uncertainty: - Firms may delay investment, reducing global investment; trade uncertainty estimated to have reduced US investment by approximately 1.5 percent in 2018. - Uncertainty can erode demand, curtail investment, diminish consumer income over the medium term, and lead to persistent US dollar appreciation with spillovers to emerging market and developing economies. - Other prominent risks and uncertainties are quantified and illustrated in Box 1.1 (model-based scenarios) and discussed in the chapter. *Source: IMF staff estimates, World Economic Outlook: April 2025.* ### 1. Trade-Restrictive Measures ### 1. Trade-Restrictive Measures ### Trade-restrictive measures and fragmentation signals - Figure panel descriptions: - Panel 1: Data are based on a count of measures and include adjustment for reporting lags. - Panel 2: Fragmentation indices measure the average number of sentences, per thousand earnings calls, that mention at least one of the following keywords: deglobalization, reshoring, onshoring, nearshoring, friend-shoring, localization, regionalization. - Panel 2 index baseline: 2013–15 = 100. - Sources cited for these series: Global Trade Alert; Refinitiv Eikon; and IMF staff calculations. ### Spillovers from US dollar appreciation - Figure 1.21 descriptions and key quantitative inputs: - Panel 1: Impulse responses from the IMF External Sector Report 2023 show the effects of a 10 percent appreciation in the nominal US dollar index with 90 percent confidence intervals. Real GDP is measured in national currencies at constant prices. - Definition detail: “Advanced economies” exclude countries with weights in the US dollar index that are larger than 4 percent in 2020: Canada, France, Germany, Ireland, Italy, Japan, Switzerland, and the United Kingdom. - Panel 2: Estimates are based on Carrière-Swallow and others’ (2021) bilateral pass-through and foreign exchange depreciation against the US dollar between mid-September 2024 and the beginning of January 2025. - Panel 2 units and labels: EMDE = emerging market and developing economy; data labels use ISO country codes. - Key mechanism highlighted: - A 10 percent US dollar appreciation produces measurable negative effects on real GDP (impulse responses shown) and raises EMDE inflation via bilateral pass-through channels. ### Risks, channels, and macrofinancial consequences - Financial market volatility and correction: - Persistent inflation or policy-driven inflation accelerations could lead to central banks maintaining higher interest rates than currently anticipated, producing cross-country interest rate differentials that may trigger capital outflows and tighter financial conditions, especially in emerging market and developing economies. - The US dollar would typically be expected to appreciate if financial conditions deteriorate sharply, but a sudden reset of the international monetary system could have major implications for the dollar. - A deeper financial market correction could be triggered by weaker-than-expected US growth and could reverberate through highly leveraged positions in nonbank financial institutions and firms with high near-term refinancing needs. - An excessive rollback of financial regulations may lead to boom-bust dynamics, with negative repercussions for household wealth and systemic stress. - Rising long-term interest rates: - Further pressure on already-high US bond yields, persistent exchange rate volatility, and sustained policy uncertainty could trigger capital and FDI outflows from emerging market and developing economies, exacerbating capital imbalances and misallocation. - Structural pressure on long-term yields could constrain fiscal space and exacerbate fiscal sustainability concerns, creating the potential for a debt spiral. - Rising social discontent and fragility: - The legacy of the cost-of-living crisis and reduced medium-term growth prospects may exacerbate polarization and social unrest, with pronounced risks in Africa and parts of Asia. - A resurgence in food and energy price inflation, driven by commodity market fragmentation or climate disasters, could worsen living conditions and heighten food security concerns, particularly in low-income countries. - Other channels: - Balance of payments crises in small countries with limited market access, high refinancing needs, and weak negotiation capacity could be triggered by worsening global financial conditions. - Commodity exporters face amplified risks amid continued decline in commodity prices, particularly oil and copper, which can signal recessions in importers such as China. ### Quantified downside impacts and historical/empirical references - Conflict and commodity impacts: - Studies cited indicate the “war tax” on growth can reach 30 percent of GDP and contribute to inflation rates as high as 15 percent (Federle and others 2024). - Negative spillovers from conflicts are estimated on average between 5 percent and 10 percent of GDP over the five to seven years following the onset of conflict. - Pass-through and timing detail: - Bilateral pass-through estimates draw on Carrière-Swallow and others (2021) and depreciations against the US dollar between mid-September 2024 and the beginning of January 2025. ### Upside scenarios and channels for better outcomes - Next-generation trade agreements: - Regional, plurilateral, and multilateral agreements that are nondiscriminatory and broad (including digital and services trade and investment) could mitigate risk, foster predictability, increase investment, boost productivity, raise potential growth, and enhance resilience by expanding reference markets and diversifying trading partners. - Mitigation of conflicts: - Cessation of hostilities and reconstruction could lower global commodity prices and reallocate resources to productive uses, raising growth in directly affected countries and producing positive spillovers for neighbors. - Structural reform momentum: - Accelerated structural reforms (regulatory streamlining, reduced red tape) and deeper integration of financial, labor, and product markets could increase innovation, productivity, and potential growth; European integration and a stronger Capital Markets Union are highlighted as avenues to increase investment and reduce global imbalances. - Growth engine powered by AI: - Significant annual reductions in AI usage costs and technological advances could boost productivity and consumption, with knowledge spillovers across industries; gains depend on complementary policies for labor reallocation, regulatory adaptation, and renewable-energy adoption. ### Policy guidance: navigating uncertainty and easing macroeconomic trade-offs - Short- to medium-term priorities: - Calibrate monetary and prudential policies carefully to maintain price and financial stability. - Gradually rebuild fiscal space to manage increased public spending needs and build buffers for future large and recurrent shocks. - Deliver on structural reforms to lift growth prospects in the medium term while harnessing technological advances prudently. - Managing trade tensions and elevated trade policy uncertainty: - Urgently resolve trade tensions and promote clear and transparent trade policies to stabilize expectations, avoid investment distortions, and reduce volatility while avoiding steps that could further harm the world economy. - Promote pragmatic cooperation and deeper economic integration—through nondiscriminatory unilateral reductions of trade barriers or regional/plurilateral/multilateral agreements—to expand trade and enhance efficiency. - Greater regional integration (for example, deepening the EU single market or implementing the African Continental Free Trade Area) can enhance global efficiency even when distortionary trade policies exist. - Industrial policy guidance: - Broad subsidies generate large fiscal costs and additional distortions and are not well-suited to counter domestic or external distortions. - Targeted industrial policies can address sectoral market failures due to externalities or economies of scale but are costly and risk government failures and misallocation. - Industrial policy programs should undergo comprehensive cost-benefit analysis, be narrowly targeted to specific objectives in sectors with well-identified externalities or market failures, and consider cooperation on industrial policy approaches to minimize distortions. *Source: IMF staff, World Economic Outlook: A Critical Juncture Amid Policy Shifts (April 2025), chapter excerpt.* ### CHAPTER 1 GLOBAL PROSPECTS AND POLICIES ### CHAPTER 1 GLOBAL PROSPECTS AND POLICIES ### Preserve international cooperation - International cooperation, including through regional and cross-regional groups, is essential to sustain global growth, tackle common problems, and mitigate cross-country spillovers. - Policy areas where cooperation can mitigate global spillovers and protect the vulnerable: trade, industrial policy, international taxation, climate, and development and humanitarian assistance (Aiyar and others 2023). - International tax cooperation can diminish harmful tax competition and prevent a race to the bottom in global corporate taxes. - In low-income countries, multilateral assistance will become even more important for addressing budget and development needs if bilateral foreign aid flows decline. ### Maintaining price and financial stability — monetary policy guidance - Central banks need to carefully calibrate monetary policy to country-specific circumstances amid a multifaceted combination of shocks. - Key tensions: - Trade policy shocks weigh on supply. - Persistent uncertainty and negative wealth effects from the April 2025 asset price correction dampen aggregate demand. - Steepening sectoral supply curves could trigger renewed inflationary pressures (see Chapter 2 of the October 2024 WEO). - Policy recommendations: - Where near-term inflation risks are tilted to the upside or inflation expectations are rising, future cuts to the policy rate should remain contingent on evidence that inflation is heading decisively back toward target. - If growth is declining or labor markets are softening while inflationary pressures and inflation expectations are clearly returning toward target, maintaining a constant nominal policy rate will over time result in a restrictive real policy stance; in these circumstances, gradual reductions in the policy rate are appropriate to move the stance closer to the neutral rate. - Clear communication is critical to enhance predictability for economic agents. - Trade-off noted: - Elevated uncertainty intensifies the trade-off between anchoring inflation expectations and safeguarding financial stability; striking a balance is crucial. ### Mitigating foreign exchange volatility - Drivers of FX volatility: persistent trade policy uncertainty, broader policy shifts, cross-country divergence in monetary policy normalization, and a more volatile currency outlook. - Vulnerabilities: - Countries with higher import dependence or a greater share of dollar-invoiced imports are particularly exposed to disruptive capital outflows. - Policy guidance from the IMF’s Integrated Policy Framework: - In countries with well-functioning and deep FX markets and low levels of foreign-currency debt: allow exchange rate flexibility and consider raising policy rates. - Use financial market policies, including rapid, decisive, and well-designed liquidity support, to mitigate FX volatility stemming from trade partners’ policies or US dollar movements. - In countries with shallow FX markets or sizable foreign-currency-denominated debt: temporary FX interventions or capital flow management measures could be appropriate, complemented by macroprudential measures and financial market reforms to deepen domestic capital markets. ### Safeguarding financial stability — prudential policy - High uncertainty and financial market volatility increase the premium on robust prudential policies. - Recommendations in stressed jurisdictions: - Release available macroprudential buffers to support credit provision and avoid broad tightening of financial conditions and cascades of business failures. - Be ready to deploy liquidity and fiscal instruments if stress reaches crisis proportions to avoid excessive deleveraging and damage to the real sector. - Maintain financial stability policies—including macroprudential policies and Basel III reforms—when implementing regulatory changes. - Enhance reporting requirements and strengthen policies to mitigate vulnerabilities in nonbank financial institutions. ### Rebuilding fiscal buffers and adjustment - Priority: restore fiscal space and put public debt on a sustainable path while meeting spending needs for national and economic security. - Core elements of credible medium-term fiscal consolidation: - Decisive yet growth-friendly adjustments. - Reprioritize expenditures and boost fiscal revenues, including by broadening tax bases. - Permanent increases in spending should be financed with revenues. - Enhance public sector spending efficiency where fiscal space is constrained. - Use of automatic stabilizers and temporary discretionary measures: - Where negative demand shocks from tariffs and trade policies are large, automatic stabilizers can dampen impact. - New discretionary measures should be well targeted, temporary, and include clear sunset clauses; deploy only for households, firms, or industries affected by severe trade dislocations. - Fiscal sustainability and frameworks: - Many countries’ current fiscal policies fall short of what is needed to ensure debt has a high probability of stabilizing (Chapter 1 of the April 2025 Fiscal Monitor). - Credible fiscal adjustment plans should be grounded in realistic assumptions about growth, debt-servicing costs, revenue mobilization, and spending needs. - Strengthen medium-term fiscal frameworks, fiscal rules, and fiscal transparency (including contingent liabilities and debt-creating flows outside the fiscal deficit). - Binding legislation and clear contingencies on responses to unexpected economic changes can bolster credibility. - Debt restructuring: - For countries in or at high risk of debt distress, achieving fiscal sustainability may require debt restructuring. - Progress in international sovereign debt resolution frameworks, including the G20 Common Framework and consensus at the Global Sovereign Debt Roundtable (GSDR), will make restructuring less costly. ### Targeted fiscal reforms and protecting growth - Policy prescriptions vary by country group: - Advanced economies: expenditure reprioritization, entitlement reforms, and revenue increases through indirect taxes or removal of inefficient incentives (April 2025 Fiscal Monitor). - Emerging market and developing economies: greater scope to strengthen domestic revenue mobilization, including broadening tax bases by reducing informality and enhancing revenue administration capacity. - Across countries: scope for reducing inefficient subsidies; gradual reforms coupled with redistribution policies can enhance public support for reforms such as energy subsidies and pension reform (Chapter 2 of the April 2025 Fiscal Monitor). - Protect growth and the vulnerable: - Protect growth-friendly spending (high-quality public investments in infrastructure and digitalization). - Complement spending with structural reforms to labor markets and regulation. - Protect the poor and vulnerable to cushion distributional impacts and enhance social acceptability. - Eliminate poorly targeted subsidies, such as energy subsidies, to reduce distributional impacts and contribute to climate goals. - Use timely, targeted, temporary support when essential: - Automatic stabilizers should operate where demand shocks are large. - Additional targeted temporary support may be deployed for severe shocks, with automatic sunset clauses and appropriate financing to keep public debt sustainable. ### Reinvigorating medium-term growth — structural reforms and inclusion of new technologies - Medium-term growth remains subdued; lifting growth is critical to improving living standards and easing macroeconomic trade-offs. - Structural reform priorities: - Labor markets, education, regulation and competition, and financial sector policies to lift productivity and potential growth. - Technological progress, including digitalization and AI, can enhance productivity and potential growth. - Increasing female labor force participation can increase labor supply. - Policies to improve human capital and labor outcomes of older workers (health, continued training) can improve attachment and productivity (Chapter 2). - Well-designed labor market interventions can gradually raise effective retirement ages. - Increased migration flows can attenuate demographic challenges while mildly boosting growth; requires swift labor market integration and skills matching (Caselli and others 2024; Beltran Saavedra and others 2024). - Regulatory and financial measures: - Robust regulatory frameworks, investments in digital infrastructure, and a digitally competent workforce are critical to broadly share gains from new technologies (Georgieva 2024). - Targeted deregulation can ease constraints on entrepreneurship, investment, and innovation but must be balanced with prudential regulations to avoid financial stability risks. - Estimates suggest sizable distortions and real GDP costs averaging 0.8 percent of annual GDP for a set of European countries (Pellegrino and Zheng 2024). - Complement labor market and regulatory reform with policies to alleviate financial constraints, remove internal trade barriers, and advance capital market reforms. ### Climate policies - Addressing climate change requires a well-designed policy mix that can generate macroeconomic benefits, including low-carbon, resilient growth. - Recommended measures: - Investments in renewable and energy-efficient technologies. - Economy-wide measures such as carbon pricing, complemented by fiscal incentives, technical assistance, and financial support for adaptation projects in low-income countries. - Transition benefits: - Many countries transitioning from fossil fuels to renewables can improve energy security, benefit employment, and reduce balance of payments risks (Dolphin and others 2024). ### Risk assessment — confidence bands and scenarios - Two complementary assessments: 1. Use of the IMF’s G20 model to derive confidence bands around the WEO reference forecast. 2. Use of the IMF’s GIMF model to simulate two scenarios: - Scenario A: policies and shocks result in widening global imbalances and a fall in global output relative to the reference forecast. - Scenario B: policies result in narrowing global imbalances and an increase in global output relative to the reference forecast. - Confidence bands methodology: - Identify economic shocks underlying historical data using the G20 model, resample these shocks, and feed them back through the model to generate risk distributions (Andrle and Hunt 2020). - Procedure adjusted to align with the growth-at-risk assessment in the April 2025 Global Financial Stability Report (GFSR). - Growth distributions are skewed to the downside; inflation distributions are somewhat skewed to the upside. - Key probabilities and metrics: - 90 percent confidence bands represented in the blue-shaded areas in Figure 1.1.1. - The probability of a recession occurring in 2025 is now assessed at 37 percent, higher than in the October 2024 WEO. - The recession risk for 2025 is defined as the probability that 2025 annual growth will be below 1.2 percent, consistent with a shallow recession starting in the third quarter. - The probability of a short-lived US recession in 2025, by this criterion, was assessed to be about 25 percent at the time of the October 2024 WEO. *CHAPTER 1 GLOBAL PROSPECTS AND POLICIES, WORLD ECONOMIC OUTLOOK: A CRITICAL JUNCTURE AMID POLICY SHIFTS — April 2025.* ### 1. US GDP Growth ### 1. US GDP Growth ### Risk assessment surrounding the reference forecast - The risk that 2025 US headline inflation will rise above 3.5 percent is now more than 30 percent (compared with 13 percent in October). - The probability that the average 2025 three-month Treasury bill rate will rise above 4.5 percent for 2025 is about 33 percent (up from 27 percent in October). - The probability that global growth in 2025 will fall below 2 percent is assessed at close to 30 percent (October assessment: 17 percent). - The probability that global headline inflation will rise above 5 percent is estimated at about 31 percent (October estimate: 34 percent). ### Scenarios simulated with GIMF (10-region version) - General assumptions: - Monetary policy responds endogenously, with floating exchange rates in most regions. - Fiscal automatic stabilizers operate. - Scenario A (global divergences + trade war + uncertainty + tighter financial conditions): - China’s currency: managed relative to the dollar through capital flow measures (less adjustment than a fully floating regime). - Trade war: incorporates an additional 50 percentage point increase in tariffs on all China-US trade in both directions relative to the reference forecast in this report. - Resulting increase of about 18 percentage points in the effective tariff rate on both US goods imports and US goods exports, relative to the current reference forecast. - Scenario B (policy reforms and positive layers): - Renegotiated US fiscal posture with lower US government debt and tax reforms; euro area higher public investment and defense spending; China productivity gains and rebalancing. ### Layers considered in Scenario A (components and quantitative assumptions) - Renewal of the US Tax Cuts and Jobs Act (TCJA): - Renewal assumed for a period of 10 years. - Includes individual and business taxes, the child tax credit, and expensing of investment. - Totaling about 11 percent of GDP over 2025–34. - Accompanying deficits back-loaded, reaching about 1.4 percent of GDP by 2027. - Assumed small additional temporary increase in US inflation expectations. - Lower productivity in Europe: - Total factor productivity growth declines by 0.2 percentage point per year over five years (starting in 2025), relative to the reference forecast. - Decline concentrated in tradables sector. - Weaker domestic demand in China: - Consumption and investment fall relative to the reference forecast by 0.7 and 0.5 percent, respectively, in 2025. - Decline builds over 2026–27 and fades after that. - Trade war specifics in Scenario A: - Additional 50 percentage point increase in tariffs on all China-US trade relative to reference forecast. - Other countries respond tit for tat to the April 2 announcement, raising tariffs on imports from the United States by the same rate. - The United States doubles the rate announced on April 2 to all countries other than China. - Net effect: about 18 percentage points increase in effective tariff rate on US goods imports and exports relative to the current reference forecast. - Increase in global uncertainty: - Shock equivalent to a three-standard-deviation increase in the global economic policy uncertainty measure in Davis (2016), about 50 percent larger than the spike observed in 2018–19. - Regions more directly exposed to tariff measures or with larger trade shares experience a somewhat greater uncertainty shock. - Tighter financial conditions: - Asset prices decline globally in 2025: about 5 percent on average in the US for the year, and about 3 percent in emerging markets. - Sovereign and corporate premiums in emerging markets excluding China increase by 50 basis points. - Corporate premiums in advanced economies and China increase by 25 basis points. - Tightening in financial conditions lasts for two years. ### Layers considered in Scenario B (components and quantitative assumptions) - Lower US government debt: - Series of fiscal reforms: reduce inefficiencies from poorly targeted tax expenditures, shift from labor to consumption taxes, contain health care costs, and permanently reduce government consumption. - Gradual decline of overall fiscal deficit, reaching 1 percent of GDP after five years. - US public debt declines by 25 percentage points of GDP in the long term. - Higher public spending in Europe: - Public investment increases in the euro area starting in 2025. - Reaches 1 percent of GDP in additional spending by 2026, stays at that level until 2030, and remains permanently higher by 0.4 percent after that. - Includes permanent increase in defense spending of 0.3 percent of GDP, starting in 2025. - Over the WEO horizon, about two-thirds of the surge in spending is financed by higher deficits; from 2030 onward, increases are offset by reallocation so debt ratios gradually return to those in the reference forecast. - Productivity gains and rebalancing in China: - Productivity in tradables and nontradables increases by about 2 and 0.5 percent, respectively, through 2030. - Saving rate decreases by 2 percentage points of GDP over the same period. - Reforms boost sentiment in the short run. ### Impacts on GDP, inflation, policy rates, and current accounts - Scenario A impacts: - Global divergences layer adds 20–30 basis points to US headline inflation and 30 basis points to the US policy rate over 2025–26. - Lower productivity in Europe lowers GDP by about 0.3 percent in 2025 and 0.5 percent in 2026. - Weaker domestic demand in China subtracts 0.3 percent from China’s GDP in 2025 and 0.5 percent in 2026. - Trade war layer reduces world GDP by 0.6 percent by 2027 and by 1 percent in the long term. - Small increase in global inflation of about 10 basis points in 2025–26 (direct tariff effect partly offset by reduced activity). - Increase in global uncertainty reduces global investment by close to 2 percent in 2025 and 3 percent in 2026 (relative to the reference forecast); overall output impact closer to –0.5 percent in 2025 and –0.8 percent in 2026. - Tighter financial conditions layer subtracts 0.5 percent from global GDP in 2025. - Combined effect of Scenario A: decrease in global GDP of about 1.3 percent by 2025 and 1.9 percent by 2026 (relative to the reference forecast). - Scenario A is disinflationary overall: global headline inflation and policy rates falling by close to 40 basis points by 2027. - US current account balance decreases (deficit worsens relative to the reference forecast); current account increases in China and the rest of the world. - Scenario B impacts: - Lower US government debt: GDP increases by 0.2 percent in 2025–26; inflation net of tax effects slightly higher; policy rates slightly higher; long-run decline in US and global real interest rates by 10 basis points. - Long-run effect: US GDP +0.4 percent relative to reference forecast; world GDP +0.2 percent relative to reference forecast. - Higher public spending in Europe: euro area GDP up to 1.3 percent by 2026; inflation increases by more than 20 basis points over the WEO horizon; euro area policy rate increases by about 50 basis points. - Productivity gains and rebalancing in China: China’s GDP up about 1 percent by 2026; potential output about 2 percent above the current reference forecast in the long run; inflation up about 20 basis points by 2030; China’s current account decreases considerably. - Combined effect of Scenario B: increase in global output of about 0.4 percent by 2026 (0.8 percent in the long term) and an increase in global inflation of about 15 basis points. ### Tariff announcements and model-based assessment - Tariff measures considered: implemented between February 1 and April 4, 2025 (including unilateral US increases and April 2 tariffs levied in proportion to partners’ bilateral trade surpluses, with a minimum rate increase of 10 percent). - Combined measures increase the effective overall tariff rate in the United States by about 25 percentage points. - Range: about 15 percentage points average increase for Canada, the euro area, and Mexico; 27 percentage points for an aggregate of Asian countries excluding China; more than 50 percentage points for China. - Tariff responses by US trading partners included: - Canada places a 25 percent tariff on 40 percent of imports of US goods; assumed to respond with one-to-one tariffs on imports of US autos. - China increases tariffs on all US imports by 34 percentage points, in addition to earlier targeted measures. - Overall countermeasures amount to an effective tariff rate increase of about 5 percentage points on total US goods exports. - Models used: - GIMF: global dynamic model with capital accumulation, numerous rigidities, three sectors, and global value chains; version employed here has eight countries (and elsewhere a 10-region version is used). - CP (Caliendo and Parro 2015): static model with 160 countries and 12 sectors (in this specification). - CFRT (Caliendo, Feenstra, Romalis, and Taylor 2023): static model with 60 countries and 17 sectors (in this specification); features heterogeneous firms with increasing returns to scale. - Short-term analysis (1–3 years) using GIMF — key assumptions and sensitivity versions: - Endogenous monetary policy responses assumed; fully floating exchange rates in Canada, the euro area, Mexico, the United States, and other regions. - Yuan-to-dollar exchange rate assumed managed through capital flow measures (some adjustment but less than fully floating). - Tariff revenues used to reduce debt over the first 30 years; rebated to households in the long term. - Two additional specification variants: - US dollar invoicing of global trade: baseline where exporters charge in local currency vs. alternative where about half of global trade is dollar-denominated (leading to inflationary pressures abroad when the dollar appreciates). - US inflation expectations: baseline assumes tariffs perceived as permanent (large dollar appreciation; US firms partly absorb import cost increases via lower margins) vs. alternative where tariffs expected to be removed after several years (limiting dollar appreciation) and US firms pass through more of the cost. *Source: IMF staff estimates.* ### Box 1.2. The Global Effects of Recent Trade Policy Actions: Insights from Multiple Models ### Box 1.2. The Global Effects of Recent Trade Policy Actions: Insights from Multiple Models ### Short-Run Effects (GIMF simulations) - Scenarios modeled: standard GIMF specification; temporary tariffs with higher pass-through; dollar invoicing for global value chains (about 50 percent of global trade invoiced in US dollars). - Currencies: - Higher tariffs lead to a depreciation of currencies with respect to the dollar. - The euro area and Other Asia experience the largest depreciations. - The yuan (China) depreciates by less relative to others due to the managed exchange rate assumption. - Exchange rate movements are considerably smaller if tariff increases are perceived as temporary — about one-third the size relative to the version where tariffs are perceived as permanent. - Inflation: - Effects on inflation are uncertain and scenario-dependent. - In the first (standard) version, the effect is limited, except in China, which experiences a decrease of about 60 basis points in 2026 because of the managed exchange rate. - When tariffs are perceived to be temporary and import costs are fully passed on, US inflation increases by close to 50 basis points in 2025. - Outside the United States, inflationary effects are larger if the dollar plays a central role in pricing global trade, because the appreciation of the dollar raises production costs globally. - Activity: - Tariffs have a large negative impact on global activity. - Largest negative effects occur for Canada and Mexico, China, and the United States. - The negative impact on the United States is amplified in the version where tariffs are perceived as temporary and import costs are fully passed on, because the resulting increase in inflation leads to a tightening of monetary policy. - The euro area and Other Asia benefit slightly in the short run from trade diversion, but the effect depends on the currency used for invoicing global trade. - Under dollar invoicing, the appreciation of the dollar weighs on global external demand, and other regions experience large losses as well. - The world economy sees a negative hit to activity that ranges between 0.4 and 1 percent of world GDP by 2027. ### Medium- to Long-Term Effects (10-year horizon; tariffs assumed permanent) - Models used: GIMF (IMF’s Global Integrated Monetary and Fiscal model), CP (Caliendo and Parro), CFRT (Caliendo, Feenstra, Romalis, and Taylor). - Key channels emphasized by models: - CP: losses mainly from inefficient movement of resources across sectors due to tariffs. - CFRT: larger losses because tariffs reduce access to foreign markets by the most productive firms and induce entry of less productive firms domestically (productivity and selection effects). - GIMF: emphasizes lower levels of capital accumulation from tariff-related distortions. - All models: tariffs imposed by large countries can create favorable terms-of-trade effects. - Results depend crucially on substitution elasticities across exporters and between foreign and domestic producers; elasticities are greater in the two trade models (CP and CFRT) than in GIMF. - Trade: - Tariffs permanently reduce global trade and reallocate flows across countries. - Canada, Mexico, China, and especially the United States see the largest declines in exports, with the US decline due in large part to the long-term real appreciation of the US dollar. - Although China sees the largest tariff increase, the decline in China’s exports is mitigated by export diversion to other markets. - Magnitudes are broadly similar across GIMF and the two trade models, despite different channels emphasized. - Output: - Tariffs generate global long-term output losses across all models. - Canada and Mexico, China, and the United States are the most affected. - Negative impact on the US is similar across GIMF (captures capital stock changes) and CFRT (captures productivity losses due to misallocation). - In GIMF, lower capital accumulation weakens potential output. - In CFRT, reduced market access prompts some firms to stop exporting and less productive firms enter import-competing sectors. - The effect on the United States is smallest in CP, because CP does not account for productivity losses due to productive firms exiting. - Impact on other regions varies across models: - GIMF shows large negative effects for the euro area and Other Asia. - Trade models (CP, CFRT) show relatively small effects for those regions due to greater trade reallocation enabled by larger elasticities. - Combined effects from lower capital accumulation (GIMF), sectoral misallocation (trade models), and prolonged trade policy uncertainty (not included in simulations) would compound losses and could offset any positive impact from trade reallocation. ### Long-Run Effects — Quantitative Results (Percent deviation from a forecast with no tariffs) - Table 1.2.1 summarizes 10-year effects on Real Exports and Real GDP across models (GIMF; Trade Models: CP and CFRT). Values are percent deviations from a no-tariff forecast. - 1. Real Exports (percent deviations) - United States: GIMF –19.3; CP –21.8; CFRT –27.6 - China: GIMF –5.4; CP –4.9; CFRT –6.7 - Canada and Mexico: GIMF –5.7; CP –1.8; CFRT –6.0 - Euro Area: GIMF –1.1; CP 0.0; CFRT –0.5 - Other Asia: GIMF –1.6; CP –0.1; CFRT –0.3 - World: GIMF –5.1; CP –3.1; CFRT –4.2 - 2. Real GDP (percent deviations) - United States: GIMF –1.3; CP –0.3; CFRT –0.9 - China: GIMF –1.1; CP –0.5; CFRT –0.7 - Canada and Mexico: GIMF –1.9; CP –0.5; CFRT –0.7 - Euro Area: GIMF –0.6; CP 0.0; CFRT –0.2 - Other Asia: GIMF –1.0; CP 0.0; CFRT 0.3 - World: GIMF –0.9; CP –0.2; CFRT –0.4 - Notes on table: - Sources: Caliendo and Parro (CP) 2015; Caliendo, Feenstra, Romalis, and Taylor (CFRT) 2023; and IMF staff estimates. - “Other Asia” includes Bangladesh, Brunei Darussalam, Cambodia, India, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. - GIMF = IMF’s Global Integrated Monetary and Fiscal model. *Source: IMF staff estimates and model simulations presented in Box 1.2 of the World Economic Outlook.* ### 1. Share of AI-Related Value-Added Output in GDP ### 1. Share of AI-Related Value-Added Output in GDP ### AI-driven electricity demand and scenario design - IMF-ENV model captures AI impact by increasing IT sectors’ TFP in China, the United States, and Europe to match expected increase in data center power demand between 2025 and 2030. - Projected constant annual TFP growth rates: 22 percent (China), 13 percent (United States), and 10 percent (Europe). - Three simulated scenarios: - Baseline scenario: excludes the AI-related TFP shock; reflects energy and emissions projections consistent with policies introduced through 2024. - AI scenario under current energy policies: includes the AI-related TFP shock; assumes composition of electricity generation remains identical to the baseline. - AI scenario under alternative energy policies: includes the AI-related TFP shock; shifts the share of renewables in total electricity generation to align with regions’ long-term strategies using feed-in tariffs for renewables. - Results for both AI scenarios are reported as deviations from the baseline scenario, unless stated otherwise. ### Effects on electricity supply and generation mix (2030) - In the AI scenario under current energy policies, total electricity supply increases relative to the baseline by: - 8 percent in the United States (525 TWh) - 3 percent in Europe (145 TWh) - 2 percent in China (237 TWh) - In the AI scenario under alternative energy policies, the total increase in electricity supply is identical to that under current energy policies, but composition shifts toward renewables: - In China, solar and wind generation offsets about 166 TWh from other sources (largely coal power). - In the United States, solar and wind generation offsets about 58 TWh from other sources (largely natural gas). - In Europe, solar and wind generation offsets about 35 TWh from other sources. ### Change in electricity prices (2030) — AI scenario under current energy policies - If power supply is sufficiently responsive, electricity price increases would be: - 0.9 percent in the United States - 0.45 percent in Europe - 0.35 percent in China - If renewables scale-up slows and transmission and distribution investments are not increased, price increases could escalate up to: - 8.6 percent in the United States - 5.3 percent in China - 3.6 percent in Europe - United States could face electricity price increases up to 9 percent from AI expansion alone (noting this appears as a rounded contextual statement in the source). ### Sectoral and macroeconomic spillovers - Rising marginal costs of electricity supply make generation increases less than proportional to economy-wide demand growth. - Without further investments in transmission and distribution, expanding AI would require redirecting electricity from other economic activities, posing challenges for energy-intensive manufacturing. - Example: In the United States, annual growth in value added of energy-intensive manufacturing sectors would fall by an average of 0.3 percentage point relative to the baseline, reducing annual GDP growth by 0.1 percentage point. - Fiscal costs of feed-in tariffs (alternative energy policies) range from 0.3 percent to 0.6 percent of GDP across countries and are financed through increased lump-sum taxes, slightly reducing household consumption. - Net effect: AI shock raises the average annual growth rate of global GDP by 0.5 percentage point between 2025 and 2030 (AI scenario under current energy policies). Gains are slightly reduced under alternative energy policies because of feed-in tariff fiscal costs, but average annual GDP growth is similar across both AI scenarios. ### Emission impacts of IT sector expansion (2025–2030) - In the AI scenario under current energy policies, the 2030 increase in greenhouse gas (GHG) emissions is: - 5.5 percent in the United States - 3.7 percent in Europe - 1.2 percent in China - Global average increase of 1.2 percent - Cumulative global GHG emissions increase between 2025 and 2030: - 1.7 gigatons (Gt) under AI scenario with current energy policies (comparable to Italy’s energy-related GHG emissions over a five-year period). - 1.3 Gt under AI scenario with alternative energy policies (24 percent less than under current energy policies). - Using a median social cost of carbon estimate of $39 per ton, the additional social cost of 1.3 to 1.7 Gt of CO2-equivalent emissions is about $50.7 billion to $66.3 billion, or 1.3 percent to 1.7 percent of the AI-driven increase in real world GDP between 2025 and 2030. ### Key uncertainties and secondary drivers - Algorithmic efficiency breakthroughs may lower computational costs for AI models, but greater compute use by firms pursuing better-performing models could counterbalance efficiency gains. - Emergence of reasoning models requires more compute in deployment. - Open-source models and lower costs may increase AI usage. - Estimates for data centers (DCs) and electric vehicles (EVs) are global and come from OPEC and the IEA, respectively; data labels use ISO country codes; e = estimate. - Additional studies cited suggest related price pressures (Chandramowli and others (2024) estimate a 19 percent rise in US wholesale electricity prices from 2025 to 2028 driven by increased demand from multiple sources including data centers and AI). ### Conclusions and policy implications - AI expansion is expected to raise global GDP, with average annual global GDP growth increasing by 0.5 percentage point between 2025 and 2030 in the modeled AI scenario. - Gains from AI are likely to outweigh the social costs of additional emissions in aggregate terms, though distributional effects may exacerbate inequalities across countries and groups. - Policy priorities: - Focus on supply-side energy policies to meet AI-driven electricity demand. - Scale up renewables and implement supportive policies (feed-in tariffs were modeled) to limit carbon intensity of added generation. - Invest in transmission and distribution capacity to avoid underinvestment, electricity price surges, and forced electricity redirection away from other economic activities. - Coordinate policymaking between governments and businesses to realize AI benefits while minimizing societal and environmental costs. *International Monetary Fund | April 2025* ### Annex Table 1.1.4. Middle East and Central Asia Economies: Real GDP, Consumer Prices, Current Account Balance, and ### Annex Table 1.1.4. Middle East and Central Asia Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment ### Regional aggregates and headline projections - Middle East and Central Asia — Real GDP: 2.4 (2024), 3.0 (2025), 3.5 (2026); Consumer Prices: 14.4 (2024), 11.1 (2025), 9.9 (2026); Current Account Balance (percent of GDP): 2.0 (2024), –0.1 (2025), –0.4 (2026); Unemployment: . . . (not shown) - Oil Exporters — Real GDP: 2.5 (2024), 2.6 (2025), 3.1 (2026); Consumer Prices: 8.5 (2024), 10.3 (2025), 10.0 (2026); Current Account Balance: 4.2 (2024), 1.4 (2025), 0.9 (2026) - Oil Importers — Real GDP: 2.3 (2024), 3.6 (2025), 4.1 (2026); Consumer Prices: 4.1 (2024), 2.4 (2025), 9.7 (2026); Current Account Balance: –3.9 (2024), –3.8 (2025), –3.5 (2026) ### Selected country projections (Real GDP; Consumer Prices; Current Account Balance; Unemployment — values by year where provided) - Saudi Arabia — Real GDP: 1.3 (2024), 3.0 (2025), 3.7 (2026); Consumer Prices: 1.7 (2024), 2.0 (2025), 2.0 (2026); Current Account Balance: –0.5 (2024), –4.0 (2025), –4.3 (2026); Unemployment: 3.5 (2024) - Iran — Real GDP: 3.5 (2024), 0.3 (2025), 1.1 (2026); Consumer Prices: 32.6 (2024), 43.3 (2025), 42.5 (2026); Current Account Balance: 2.7 (2024), 0.9 (2025), 1.3 (2026); Unemployment: 7.8 (2024), 9.5 (2025), 9.2 (2026) - United Arab Emirates — Real GDP: 3.8 (2024), 4.0 (2025), 5.0 (2026); Consumer Prices: 1.7 (2024), 2.1 (2025), 2.0 (2026); Current Account Balance: 9.1 (2024), 6.6 (2025), 6.4 (2026) - Kazakhstan — Real GDP: 4.8 (2024), 4.9 (2025), 4.3 (2026); Consumer Prices: 8.7 (2024), 9.9 (2025), 9.4 (2026); Current Account Balance: –1.3 (2024), –3.6 (2025), –3.7 (2026); Unemployment: 4.7 (2024), 4.6 (2025), 4.6 (2026) - Azerbaijan — Real GDP: 4.1 (2024), 3.5 (2025), 2.5 (2026); Consumer Prices: 2.2 (2024), 5.7 (2025), 4.5 (2026); Current Account Balance: 7.8 (2024), 7.8 (2025), 4.1 (2026); Unemployment: 5.4 (2024), 5.3 (2025), 5.3 (2026) - Kuwait — Real GDP: –2.8 (2024), 1.9 (2025), 3.1 (2026); Consumer Prices: 2.9 (2024), 2.5 (2025), 2.2 (2026); Current Account Balance: 29.5 (2024), 22.7 (2025), 19.3 (2026) - Qatar — Real GDP: 2.4 (2024), 2.4 (2025), 5.6 (2026); Consumer Prices: 1.1 (2024), 1.2 (2025), 1.4 (2026); Current Account Balance: 17.2 (2024), 10.8 (2025), 10.3 (2026) ### Selected oil-importing economies and notable country projections - Egypt — Real GDP: 2.4 (2024), 3.8 (2025), 4.3 (2026); Consumer Prices: 33.3 (2024), 19.7 (2025), 12.5 (2026); Current Account Balance: –5.4 (2024), –5.8 (2025), –3.7 (2026); Unemployment: 7.4 (2024), 7.7 (2025), 7.7 (2026) - Pakistan — Real GDP: 2.5 (2024), 2.6 (2025), 3.6 (2026); Consumer Prices: 23.4 (2024), 5.1 (2025), 7.7 (2026); Current Account Balance: –0.5 (2024), –0.1 (2025), –0.4 (2026); Unemployment: 8.3 (2024), 8.0 (2025), 7.5 (2026) - Morocco — Real GDP: 3.2 (2024), 3.9 (2025), 3.7 (2026); Consumer Prices: 0.9 (2024), 2.2 (2025), 2.3 (2026); Current Account Balance: –1.4 (2024), –2.0 (2025), –2.2 (2026); Unemployment: 13.3 (2024), 13.2 (2025), 12.9 (2026) - Uzbekistan — Real GDP: 6.5 (2024), 5.9 (2025), 5.8 (2026); Consumer Prices: 9.6 (2024), 8.8 (2025), 7.2 (2026); Current Account Balance: –5.0 (2024), –5.0 (2025), –4.8 (2026); Unemployment: 5.5 (2024), 5.0 (2025), 4.5 (2026) - Sudan — Real GDP: –23.4 (2024), –0.4 (2025), 8.8 (2026); Consumer Prices: 176.8 (2024), 100.0 (2025), 63.2 (2026); Current Account Balance: –3.5 (2024), –3.6 (2025), –8.6 (2026); Unemployment: 60.8 (2024), 62.0 (2025), 59.7 (2026) ### Other economies and memoranda - Georgia — Real GDP: 9.4 (2024), 6.0 (2025), 5.0 (2026); Consumer Prices: 1.1 (2024), 3.6 (2025), 3.2 (2026); Current Account Balance: –4.4 (2024), –4.4 (2025), –4.7 (2026); Unemployment: 13.9 (2024), 13.9 (2025), 13.9 (2026) - Armenia — Real GDP: 5.9 (2024), 4.5 (2025), 4.5 (2026); Consumer Prices: 0.3 (2024), 3.2 (2025), 3.0 (2026); Current Account Balance: –3.9 (2024), –4.5 (2025), –4.8 (2026); Unemployment: 13.0 (2024), 13.5 (2025), 14.0 (2026) - Kyrgyz Republic — Real GDP: 9.0 (2024), 6.8 (2025), 5.3 (2026); Consumer Prices: 5.0 (2024), 7.0 (2025), 5.7 (2026); Current Account Balance: –31.1 (2024), –8.5 (2025), –7.5 (2026); Unemployment: 4.0 (2024), 4.0 (2025), 4.0 (2026) - Memorandum: Caucasus and Central Asia — Real GDP: 5.4 (2024), 4.9 (2025), 4.3 (2026); Consumer Prices: 6.7 (2024), 8.1 (2025), 7.4 (2026); Current Account Balance: –1.3 (2024), –2.0 (2025), –2.6 (2026) - Memorandum: Middle East and North Africa — Real GDP: 1.8 (2024), 2.6 (2025), 3.4 (2026); Consumer Prices: 14.6 (2024), 12.7 (2025), 10.7 (2026); Current Account Balance: 2.8 (2024), 0.3 (2025), 0.1 (2026) ### Footnotes and definitional notes relevant to interpretation - Consumer price movements are shown as annual averages; year-end to year-end changes are available in Tables A6 and A7 in the Statistical Appendix. - Current Account Balance is expressed as percent of GDP. - Unemployment is expressed in percent; national definitions of unemployment may differ. - Regional group inclusions: - Oil Exporters includes Libya and yemen. - Oil Importers includes Djibouti, Lebanon, and Somalia; Lebanon has a country-specific note in the Statistical Appendix. - Some aggregates exclude Afghanistan and Syria because of the uncertain political situation; country-specific notes for Israel, Sudan, and West Bank and Gaza are in the Statistical Appendix. - Data for some countries are based on fiscal years; see Table F in the Statistical Appendix for exceptional reporting periods. *Source: IMF staff estimates.* ### Introduction ### Introduction ### Unprecedented demographic changes expected - Global population growth will slow from 1.1 percent per year before the COVID-19 pandemic to basically zero in 2080–2100 (Figure 2.1). - The average age of the world’s population is projected to increase by 11 years between 2020 and the end of the century. - The share of the older population (ages 65 and older) is increasing rapidly worldwide, driving the rise of the “silver economy.” - Life expectancy has increased by about 4½ years over the past two decades; healthy life expectancy has increased at a similar pace. ### Objectives and core questions - The chapter pursues three intertwined objectives: - (1) Assess the extent to which cohorts are aging in better health and its impact on labor market outcomes. - (2) Evaluate the global economic implications of demographic shifts and healthy-aging trends. - (3) Explore how targeted policies can help mitigate the negative effects of population aging. - Key questions addressed: - Global demographic transition: How have demographic trends evolved globally? How fast and uneven is the pace of aging across different countries? - Healthy aging: Is there evidence that later-born cohorts are healthier than earlier-born cohorts at the same age? How do healthy-aging trends differ across countries and socioeconomic groups? Has healthy aging increased labor market attachment and productivity of older individuals? - Economic implications: What are the likely implications of population aging for growth, interest rates, public finances, and external balances? How do these implications differ across countries? To what extent can longer and more productive working lives offset challenges? - The role of policies: How can policies generate growth tailwinds to mitigate adverse economic impacts? ### Data, empirical approach, and model - Microsurvey data: approximately 1 million individuals from 29 advanced and 12 emerging market economies over 2000–22. - Structural model: a multicountry, overlapping-generations general equilibrium model covering 69 economies—representing about two-thirds of global output and the world’s population—to assess economic implications through the end of the century. - Analytical strategy: - Establish healthy-aging trends and associations with labor market outcomes using microdata. - Produce baseline projections under current policies. - Use the model to assess the potential impact of targeted progrowth policies. ### Main empirical findings on healthy aging and labor markets - Broad-based evidence of healthy-aging gains across physical, cognitive, and mental health indicators for individuals ages 50 and above (2000–22). - Cognitive improvements are particularly prominent: - Data from a sample of 41 advanced and emerging market economies indicate that, on average, a person who was 70 in 2022 had the same cognitive ability as a 53-year-old in 2000. - Over the course of a decade, the observed pace of improvement in cognitive abilities is associated with: - an increase of approximately 20 percentage points in the likelihood that individuals remain engaged in the labor market (working or actively seeking employment), - an increase of about six hours in average weekly hours worked, - and a 30 percent rise in labor earnings, conditional on being employed. - Frailty index findings: - On average, the frailty of a 70-year-old person in 2022 corresponded to that of a person who was 56 in 2000. - Healthy-aging gains are heterogeneous across countries and socioeconomic groups; cognitive health is positively associated with GDP per capita but with notable cross-country variation. ### Projected macroeconomic and fiscal implications - Healthy aging provides a positive labor and human-capital tailwind but does not fully offset demographic headwinds: - Improvements in labor supply and human capital due to healthy aging are expected to contribute about 0.4 percentage point annually to global GDP growth over 2025–50. - Despite this tailwind, average global annual output growth under current policies is projected to decline by 1.1 percentage points during 2025–50 compared with the 2016–18 average. - Demographic trends alone are expected to account for almost three-fourths of this decline. - Interest rates and external positions: - Lower growth combined with an increasing share of older individuals with higher accumulated savings in large economies is projected to exert downward pressure on interest rates. - Most countries are likely to face a worse interest-growth differential than in the recent past. - Uneven demographic trends are likely to exert widening pressure on external global positions through the end of the century. - Public finances: - Many countries will need sizable efforts to stabilize public-debt-to-GDP ratios and will need higher primary balances than in 2016–18 to keep debt ratios stable from 2030 onward. ### Policy implications and potential payoffs - A multifaceted policy approach can increase labor supply, boost growth, and ease fiscal pressures: - Lifelong policies to support human capital in late adulthood (ages 50 to retirement) — including health promotion and prevention — can significantly counter the effect of population aging on growth. - Raising labor force participation among the 65-and-older age group by gradually increasing the effective retirement age in line with improvements in life expectancy. - Closing gender gaps where they remain large. - Expanding access to international financial markets through credit and capital market reforms, and strengthening governance and institutions to help younger, low-income countries reap demographic dividends. - Quantified policy impact: - A combination of labor supply policies could boost global annual output growth by about 0.6 percentage point over the next 25 years, offsetting almost three-fourths of the drag from demographics during that period. - Fiscal dividends from progrowth policies would enable many countries to rebuild buffers and create space for critical spending needs. ### Scope, limitations, and exclusions - The chapter examines implications for growth, interest rates, external balances, and public finances but does not cover: - shifts in consumer demand and sectoral reallocations driven by aging, - implications for the financial sector, house prices, and urbanization, - endogenous technological responses to aging (such as automation and artificial intelligence), which could mitigate some negative growth effects. ### Uneven pace of global population aging (summary) - Under current demographic projections: - Economies are progressively crossing their “demographic turning point” (the year when the share of the working-age population begins to decline). - By 2035, all advanced economies and the largest emerging markets will have crossed this threshold. - By 2070, most low-income countries will have experienced similar shifts. - The share of the older population (ages 65 and above) is projected to increase rapidly across regions, with early agers (largest advanced economies and emerging markets in Europe and Asia) seeing the steepest rises; Latin America, Africa, and the Middle East will also experience sharp increases. - The window for low-income countries to reap demographic dividends is gradually closing. *Source: text - Introduction, https://www.imf.org/-/media/files/publications/weo/2025/april/english/text.pdf* ### 2. Change in Health-Adjusted Life Expectancy, 2000–21 ### 2. Change in Health-Adjusted Life Expectancy, 2000–21 ### Changes in health-adjusted life expectancy and data notes - World average is population-weighted, based on 183 countries. - “Frontier” = maximum life expectancy across countries. - Sources: United Nations World Population Prospects; World Health Organization; and IMF staff calculations. ### Cognitive capacity and cross-country patterns - Cognitive health score: first principal component of cognitive indicators, standardized to mean zero, standard deviation one. - Regression sample period is 2000–22. - Regression framework: ordinary least squares regressions of the cognitive health score of individuals ages 50 and older on the survey year, with individuals’ age, gender, education, and household wealth controlled for; vertical-axis country fixed effects are reported. - Figure labels use International Organization for Standardization (ISO) country codes. - PPP = purchasing power parity. ### Cognitive health inequalities (within and across countries) - Average cognitive health scores are significantly lower for: - individuals in rural locations, - individuals with at most primary education, - lower-wealth households. - T-tests indicate that the differences in means are statistically significant for all socioeconomic categories. - AEs = advanced economies; EMs = emerging markets. - Empirical note: although faster improvements in healthy aging in emerging markets (compared with advanced economies) suggest some cross-country “catching up,” the pace of health improvements across other dimensions has been similar despite widely varying initial conditions, indicating persistent socioeconomic health disparities related to gender, location, education, and wealth. ### Determinants of functional capacity - Lifestyle factors—levels of physical activity, body mass index, and smoking—are significant determinants of the functional capacity of older individuals after age and socioeconomic characteristics are controlled for (Online Annex 2.2). ### Policy-relevant examples - Singapore’s increase in life expectancy (from 90th in the world in 1950 to first in 2018) is cited as illustrating effective policies, including: - subsidizing healthier food options, - regulating sugar content in beverages, - building widespread public fitness centers, - introducing automobile congestion charges, - subsidizing housing in proximity to family to promote intergenerational social connections (Buettner 2012). ### Labor market implications of healthy aging — associations and identification - Simple regression analysis (correlations) shows higher health indicator scores are associated with: - increased total labor earnings and labor productivity (proxied by hourly earnings), - higher labor force participation, - more hours worked (see Online Annex Table 2.2.3). - Concerns about causality are noted: increasing retirement age may negatively affect health for some; unobserved drivers could bias correlations. - Identification strategy: instrumental-variables approach exploiting exogenous health shocks proxied by the development of chronic diseases, controlling for smoking, poor nutrition, physical inactivity, and excessive alcohol use. ### Estimated causal effects of healthy aging on labor outcomes (instrumented estimates) - Estimates remain statistically significant and are quantitatively larger than simple correlations (Figure 2.8). - Economic magnitudes implied by the estimates: - Average cognitive health gains observed for older-age individuals over a decade are associated with rises in labor earnings and labor productivity by about 30 percent. - An increase in likelihood of participating in the labor force by about 20 percentage points. - Higher numbers of average weekly hours worked by about six hours. - Additional associations: better health is associated with later retirement, working more weeks per year, and a lower probability of being unemployed; qualitatively similar relationships hold for other health indicators (Online Annex Table 2.2.4). - Robustness: qualitatively similar results obtained using an augmented inverse-probability-weighting approach and when using the composite health measure of frailty (Online Annex 2.2). ### Heterogeneity by age and occupation - Labor market impact of a given improvement in health varies with age: - Impact on labor force participation for individuals in their 50s is significantly larger than for individuals in their 60s and 70s (Online Annex Figure 2.2.6). - Other factors—skills obsolescence, pension incentives, and age discrimination—can constrain older individuals’ labor market attachment. - Occupation-level evidence suggests older workers with college educations are relatively well positioned to benefit from the productivity-boosting potential of AI because it complements their tasks and skills (Box 2.3). ### Summary policy implications for narrowing healthy-aging gaps - Strengthening health care quality and expanding access, particularly for preventive care and for disadvantaged groups. - Providing incentives for healthy lifestyles. ### Economic implications of global population aging — conceptual channels - Demographic changes affect: - population growth rates and age structures (fertility, mortality, migration), - old-age dependency ratio (number of individuals ages 65 and older relative to the number in the working-age population), - expected length of working lives relative to retirement, influencing saving behavior and aggregate savings, - capital per worker (a shrinking workforce increases capital per worker, reducing investment needs), - net foreign asset positions via uneven aging across economies. - These forces tend to place downward pressure on interest rates (Gagnon, Johannsen, and López-Salido 2021; April 2023 WEO, Chapter 2). - Physiological aging influences labor supply and retirement decisions independently of chronological age; improvements in how individuals age can affect education, work, and saving decisions, with broad aggregate implications. - Asynchronous aging across countries creates opportunities for cross-border reallocation of production factors (capital flows and labor migration). ### Model used for general equilibrium analysis - Model extension of the global overlapping-generations model in Auclert and others (2024); details in Online Annex 2.3. - Country coverage: - 21 advanced economies, - 4 emerging market economies (including China and India, together accounting for almost 50 percent of emerging market economies’ GDP), - a bloc economy comprising 44 low-income countries (LICs) expected to pass demographic turning points after 2040 (denoted LIC bloc). - The model accounts for about two-thirds of the world economy and population. - Healthy aging: - Country-specific age-productivity profiles vary over time to integrate the impact of healthy aging on effective labor supply (proxied by labor earnings). - Baseline assumes continued—though moderating—improvement in the functional capacity of workers ages 50 and older over the next three decades, reflecting persistence of improvements observed over 2000–22. - Productivity drivers: growth of total factor productivity (TFP) at the global frontier, convergence toward the TFP frontier, and the impact of demographics on TFP growth via innovation and entrepreneurship channels. - Global capital market assumptions: - Integration of China, India, and the LIC bloc into global capital markets is imperfect, producing a wedge between domestic and global interest rates for these economies that is assumed to decline gradually with reforms and deeper financial integration. - Fiscal policy calibration: - Initial values for effective retirement rates, labor taxes, retirement replacement rates, and other public spending are calibrated to match country-specific targets. - Baseline effective retirement ages are assumed to increase by one month per year over 60 years in all countries (except for India and the LIC bloc, where they are assumed unchanged). - Labor taxes, replacement rates, and other public spending adjust period by period so that trajectories of debt-to-GDP ratios are aligned with WEO projections until 2029 and remain stable from then onward. *Source: IMF staff synthesis of Chapter 2, "The Rise of the Silver Economy: Global Implications of Population Aging," World Economic Outlook: A Critical Juncture Amid Policy Shifts, April 2025.* ### 1.1 percentage points lower than the average over ### text - 1.1 percentage points lower than the average over ### Projected growth and demographic impacts - Global GDP growth is projected to slow by 2 percentage points relative to the 2016–18 average by 2025–2100, of which 1.1 percentage points are attributable to demographic forces. - Advanced economies with relatively older populations (such as Japan) are projected to see their economies shrink under baseline fertility and migration assumptions. - Advanced economies that avoid a decline in working-age populations (for example, Canada and the United States) will continue to grow but more slowly over time. - In emerging market and developing economies: - China: projected deceleration of 2.7 percentage points in GDP growth over 2025–50 relative to 2016–18. - India: projected deceleration of about 0.7 percentage point in 2025–50, with the decline intensifying over 2050–2100. - Low-income countries (LIC bloc): expected sharper deceleration in the second half of the century once demographic dividends turn into headwinds. - Output per capita: world average output per capita growth is about 0.6 percentage point lower in 2025–50 and 1.8 percentage points lower toward the end of the century relative to 2016–18. - Net foreign assets (NFA): - Large emerging market economies (China and India) would accumulate foreign assets, especially over 2050–2100. - Many advanced economies would gradually draw down foreign assets throughout the projection horizon. - The LIC bloc’s NFA would worsen through most of the projection period, with the trend slowing and reversing around 2070. ### Interest-growth differential and fiscal requirements - The interest-growth differential (r – g) over the next 25 years is projected to be higher than the 2016–18 average for all economies except India and the LIC bloc. - Average r – g for the world is projected to be 1 percentage point higher in 2025–50 than in 2016–18, moderating to about 0.5 percentage point toward the end of the century. - To keep debt-to-GDP ratios stable from 2030 onward, about half of the model economies are projected to need higher primary-balance-to-GDP ratios than their 2016–18 averages; this group includes China, Japan, and the United States. - Five model economies would see fiscal respite from lower r – g over 2025–50: Greece, India, Italy, Spain, and the LIC bloc. ### Contribution of healthy aging and demographics to growth - Healthy aging: - For the world, healthy aging is projected to add about 0.4 percentage point to GDP growth, on average, over 2025–50. - If healthy-aging gains were abstracted from, global output growth would be projected to slow by 1.5 percentage points in 2025–50 rather than 1.1 percentage points (relative to 2016–18). - Country-level contributions of healthy-aging gains to average annual output growth range from about 0.3 percentage point to 0.6 percentage point over 2025–50. - The average contribution to world growth from healthy aging would be about 0.1 percentage point over 2050–75 and decline further thereafter. - Demographics: - Demographic forces alone explain about half of the projected slowdown in GDP growth over 2025–2100 relative to 2016–18. - Among model countries, the average contribution of demographic forces to GDP growth in 2025–2100 ranges from close to –2.8 percentage points in India to –0.4 percentage point in Finland and Slovenia. - Under alternative fertility assumptions (UNWPP high/low), country-specific growth estimates vary, for example, by 0.5 percentage point in Australia and 1.6 percentage points in China; demographic contributions remain mostly negative under different fertility assumptions. ### Labor supply policy scenarios and growth dividends - Three key labor supply policy levers assessed: healthy-aging policies, increasing effective retirement age, and closing gender labor force participation (LFP) gaps. - Healthy-aging policies scenario: - Assumes narrowing cross-country differences in functional capacity of workers ages 50 and older by one-fourth, equivalent to about 49 percent of estimated gains over 2000–22. - World average annual GDP growth would be about 0.2 percentage point higher over 2025–2100 than in the baseline, and 0.3 percentage point higher over 2025–50. - Higher effective retirement age scenario: - Assumes effective retirement ages increase faster than in the baseline where life expectancy at retirement is 20 years or more. - World average annual GDP growth would be about 0.1 percentage point higher over 2025–2100 than in the baseline. - Closing gender LFP gaps scenario: - Assumes narrowing country-specific gender gaps in labor force participation by three-fourths by 2040. - World average annual GDP growth would be 0.1 percentage point per year higher over 2025–2100 than in the baseline, and 0.3 percentage point higher over 2025–50. - Combined labor supply policies: - Implementing all three policies together would raise global average annual growth by 0.3 percentage point over 2025–2100 versus the baseline, reversing about one-third of the demographic-driven drop in growth through the end of the century. - Over 2025–50, the combined package would boost global growth by about 0.6 percentage point, offsetting close to three-fourths of the drag from demographics during that period. - Some countries—India, low-income countries, and some European economies—could receive larger growth dividends. ### Fiscal implications of labor supply policies - Direct effects: higher female LFP and later retirement increase labor tax revenues and reduce transfer payments; healthy-aging policies can raise productivity and participation. - Indirect effects via r – g: higher GDP growth from labor supply policies can reduce r – g and ease fiscal pressures, though policies could also put upward pressure on interest rates by lowering desired aggregate savings and raising investment demand. - Net fiscal space: - Under the combined policy scenario and assuming fiscal dividends are used equally to reduce taxes, increase transfers, and increase other spending, gains would be: - Equivalent to more than 4 percentage points of GDP in Greece and Italy. - Less than 1 percent of GDP in China and the United Kingdom. - An additional exercise suggests many countries could gain fiscal space while rebuilding buffers by reducing public debt to its 2016–18 average level, though not all countries would be able to do so. - Caveats: - Implementing some policies may entail direct budgetary costs (for example, active labor market policies), which could reduce net fiscal dividends relative to model simulations. - The model abstracts from the direct fiscal costs of implementing labor supply policies due to large uncertainty in net costs. - Government borrowing costs may differ from equilibrium interest rates due to market depth, international currency status, increased debt issuance, shifts in safe asset demand, and market sentiment. *Source: IMF staff calculations, World Economic Outlook: A Critical Juncture Amid Policy Shifts, April 2025.* ### Conclusions and Policy Implications ### Conclusions and Policy Implications ### Demographic trends and healthy aging - Declining birth rates and increasing life expectancy are leading to a sustained decline in population growth and significant changes in the age structure of economies. - Individuals across a diverse set of economies are aging in better health than previously; increased longevity has been accompanied by improvements in the physical and cognitive capacities of older individuals across subsequent cohorts, though sizable disparities remain across socioeconomic groups and countries. - Healthier aging has been associated with higher labor force participation rates, a higher likelihood of being employed, and higher labor earnings for individuals ages 50 and older. ### Growth and fiscal implications - Even accounting for gains from healthy aging, demographic forces are expected to depress global economic growth: - Ongoing gains from healthy aging are estimated to boost annual global growth by about 0.4 percentage point over 2025–50. - Under current policies global output growth would decline on average by about 2 percentage points through the end of the century. - With lower growth prospects and historically high levels of public debt, many countries will need significant fiscal efforts to keep debt-to-GDP ratios stable beyond 2030. - A combination of policies for boosting labor supply could attenuate the slowdown in global growth over 2025–50 resulting from demographic headwinds by almost three-fourths. - Although progrowth policies could contribute to higher global interest rates, they would provide substantial fiscal dividends and enable many countries to rebuild fiscal buffers and create additional fiscal space; some economies would still require additional fiscal efforts. ### Health promotion, prevention, and cost‑effectiveness - Policies emphasizing health promotion and prevention are warranted and need careful deployment to address health inequalities. - Measures tackling behavioral risk factors across the life course—tobacco smoking, harmful alcohol use, physical inactivity, unhealthy diets—and other risk factors related to the environment and mental health can decrease the incidence of chronic diseases and health inequalities. - Examples of measures: immunization, regular health checks, screenings for chronic diseases, campaigns to prevent substance abuse, taxation (for example, on tobacco and unhealthy food), regulations (for example, to promote smoke-free environments), and providing access to mental health resources. - Many such measures span beyond the health care sector, are not necessarily costly, and evidence suggests many are cost-effective and can produce savings by reducing expenditure on health intervention down the road. - Spending on health promotion and prevention accounts for only 1–6 percent of total health expenditure in member countries of the Organisation for Economic Co-operation and Development and tends to be cut disproportionately during downturns. ### Labor supply, pensions, and workplace policies - A comprehensive approach—combining pension reforms, training, and workplace adaptations—should complement health-oriented interventions to increase effective retirement ages in line with improvements in life expectancy. - Policy levers to raise effective retirement ages include: changes to statutory retirement ages, reducing early retirement benefits, introducing incentives to postpone retirement, and allowing phased retirement. - Pension reforms need to balance sustainability with adequate protection to mitigate old-age poverty and inequality. - Age-based policy provisions may be inefficient given heterogeneity among older workers and should be reconsidered. - Lifelong upskilling and reskilling programs are crucial to keep individuals employable as they age, especially given the potential AI revolution: - Skilled older workers are likely to benefit from complementarities with AI; unskilled workers may struggle to keep jobs or manage job transitions. - Flexible work arrangements and workplace adjustments that improve age-friendliness of jobs can support longer working lives. - Combating biases and discrimination against older individuals is important to ensure access to reskilling opportunities and to prevent premature labor force exits. ### Policies to support female labor force participation and work-life balance - Policies that reduce labor force participation gaps—particularly by fostering higher female labor force participation—can provide substantial growth dividends. - To avert adverse impacts on fertility, policies should aim to improve work-life balance for women, including improved parental leave systems, expanded affordable childcare options, and promoting flexible work arrangements. ### Global integration, capital flows, and migration - Enhanced global integration can support growth amid asynchronous aging across countries. - Policies that enhance access to international financial markets—including credit and capital market reforms and strengthening governance and institutions—are key for enabling low-income countries to reap demographic dividends. - Model assumptions and scenario results for low-income countries (LIC bloc): - Status quo scenario: initial interest-rate wedge of 300 basis points remains; LIC bloc imports limited capital; net foreign liabilities peak at about 13 percent of GDP. - Enhanced financial integration scenario: interest-rate wedge gradually declines to zero by 2070; net foreign liabilities reach about 180 percent of GDP by 2070–80; capital stock and output are significantly higher than in the status quo scenario. - Long-term outcomes: GDP and GDP per capita are about 19 percentage points higher than in the status quo scenario; gross national income (GNI) per capita increases by about 7 percentage points in the long run. - Enhanced financial integration plus migration scenario: annual flow of young migrants from the LIC bloc into advanced economies gradually increases up to 2040 such that, from then onward, annual outflows of young migrants are twice as large as recent historical flows and remain at that higher level thereafter; aggregate GDP in the LIC bloc would be about 5 percentage points lower relative to the enhanced financial integration scenario but still 14.5 percentage points higher than in the status quo scenario. - GDP per capita in the LIC bloc under enhanced integration plus migration: about 1.2 percentage points lower than in the enhanced financial integration scenario but almost 18 percent higher than in the status quo scenario. ### Pension reform simulations and timing - The Overlapping Generations and Retirement model simulations show aging depresses per capita consumption for both the young and the old in the absence of reforms; consumption losses can be attenuated and shared more equitably across generations if a reform mix is implemented and reforms start earlier. - Reform calibration: scenarios are set to reverse the aging-induced increase in the public-debt-to-GDP ratio over 75 years. - Size of reforms needed to stabilize age-induced increase in public debt (Table 2.2.1): - Single-Instrument Reform - Retirement Age (Years): Immediate +6; Delayed +8 - Replacement Rate (%): Immediate −25; Delayed −35 - Contribution Rate (%): Immediate +18; Delayed +34 - Mix - Retirement Age (Years): Immediate +2; Delayed +2.7 - Replacement Rate (%): Immediate −8.3; Delayed −11.7 - Contribution Rate (%): Immediate +6; Delayed +11.3 - Key message on timing: earlier, gradual, and sustained reform efforts can ensure intergenerational fairness and help maintain economic stability amid demographic transitions. ### Technological progress, AI, and research on aging - Structural reforms to promote market competition, financial accessibility, and labor market flexibility can boost productivity growth by fostering innovation and a more efficient allocation of capital and labor. - Technological advances, including AI-related technologies, are complementary to labor in occupations more typical of older workers and can provide tools for coping with functional decline due to aging. - Promoting research and development in the scientific understanding of biological aging has potential to further extend healthy longevity. - AI-based solutions in health care can scale up preventive health practices (for example, automating routine screening and diagnostics) and bring clinical expertise to underserved and remote areas, helping to reduce heterogeneity in physical and cognitive capabilities among older individuals. *Source: Conclusions and Policy Implications (text), Chapter 2, “The Rise of the Silver Economy: Global Implications of Population Aging,” World Economic Outlook, April 2025.* ### Box 2.2. Intergenerational Considerations in Pension Reforms ### Box 2.2. Intergenerational Considerations in Pension Reforms ### Key findings on pension reform design and timing - A reform implemented immediately may require a 6-year increase in the retirement age to contain the rise in public debt induced by aging; if the reform is postponed by 10 years, an 8-year increase in the retirement age is needed. - Under a combined reform scenario, the increase in retirement age could be less, at two years. - The consumption losses from reforms that rely on a single instrument are significantly larger than those when a mix of instruments is used, at least for one of the generations (see Figure 2.2.1). - Combining the three measures helps ensure the burden is shared across the young and old, potentially contributing to the acceptability and feasibility of reforms. - The size of required fiscal measures and aggregate consumption losses are larger when reforms are postponed for 10 years compared with immediate implementation; consumption losses from postponing reforms usually fall disproportionately on the young compared with the old. - The analysis is calibrated for a typical advanced economy with a population that has already aged significantly; lessons are even more pertinent for emerging market economies and low-income developing countries, which have lower current old-age dependency ratios but will experience a faster pace of population aging and thus have less time to react. - Note on measurement horizons: Solid bars in Figure 2.2.1 denote average consumption losses or gains over a period of 40 years from a reform implemented immediately; markers denote consumption losses or gains if instead the reform is delayed by 10 years. ### Interaction with population aging and intergenerational burden - Aging-induced fiscal pressures require earlier action to reduce future burden: immediate reforms permit smaller increases in retirement age and smaller aggregate consumption losses than delayed reforms. - A mix of policy instruments (lower replacement rate, higher retirement age, higher contribution rate) distributes burden more evenly across generations than single-instrument reforms. ### AI, labor markets, and implications for older workers (connected considerations) - Artificial intelligence (AI) is rapidly reshaping labor markets and can both boost productivity and render certain skills obsolete, increasing unemployment risk; older workers (ages 55 and older) are particularly vulnerable because historical evidence suggests they are less likely to adapt to new technologies and transition to new occupations. - Occupations are grouped into three categories: HELC (high exposure and low complementarity), HEHC (high exposure and high complementarity), and low exposure. - Empirical patterns: - About 65 percent of workers in Brazil and 45 percent in the United States work in HEHC occupations. - Workers with tertiary education are more exposed to AI, with more than 80 percent employed in AI-intensive occupations; most of those are concentrated in HEHC occupations poised for productivity and wage gains. - Across different education levels, 20–30 percent of older workers are employed in HELC jobs vulnerable to AI-driven disruptions. - Job characteristics and age-friendliness: - AI-exposed jobs are compatible with working from home and involve less physical effort relative to low-exposure jobs, and generally offer higher earnings; however, they often involve higher levels of responsibility and stress, which can reduce desirability for older workers. - Over the past three decades there has been a rise in age-friendly jobs—characterized by less-demanding physical activity, lower levels of job hazards, and moderate work paces—which has tended to benefit females, college graduates, and older workers. - Transition risks and policy needs: - Older workers are less likely to switch jobs or occupations, limiting their ability to relocate to growing sectors as labor demand for HELC occupations declines. - Targeted policies are necessary for older workers in HELC occupations, including active labor market programs, job transition support, stress management, remote work options, and flexibility to retain older workers in AI-enhanced roles. ### Policy recommendations - Act sooner rather than later to implement pension reforms to limit required increases in retirement age and reduce aggregate consumption losses. - Use a combination of tools (for example, reductions in replacement rates, increases in retirement age, and higher contribution rates) to ensure a fairer distribution of the burden across generations and enhance reform feasibility and acceptability. - For labor market challenges posed by AI: - Implement targeted active labor market programs and job transition support for older workers in HELC occupations. - Improve job conditions (stress management, remote work options, flexibility) to help retain older workers in HEHC occupations that are likely to benefit from AI. *Source: IMF staff calculations and analysis in Box 2.2. Intergenerational Considerations in Pension Reforms, World Economic Outlook: A Critical Juncture Amid Policy Shifts, April 2025.* ### CHAPTER 2 ThE RISE OF ThE SILvER ECONOMy: GLObAL IMPLICATIONS OF POPULATION AGING ### CHAPTER 2 ThE RISE OF ThE SILvER ECONOMy: GLObAL IMPLICATIONS OF POPULATION AGING ### Major conclusions and executive findings - As of 2024, the global stock of legal migrants and refugees had reached 304 million—or 3.7 percent of the global population—almost double that observed in 1995, with about one in six being refugees or asylum seekers. - About 40 percent of migrants and 75 percent of refugees now reside in emerging market and developing economies. - Tighter policies in other jurisdictions can increase inflows to a given economy by 10 percent cumulatively over five years. - Output in an average economy receiving these additional inflows can increase by 0.2 percent over the same five-year horizon. - The overall effect on output can often be modest because inflows can strain local resources and refugees tend to be less well matched with skills needs in local labor markets; output effects can be larger when the skills of migrants and refugees complement those of natives. - Policy emphasis: improve integration of migrants and refugees and minimize skills mismatches; prioritize productive public investment and promote private sector development to alleviate pressures on local services and infrastructure. - International policy cooperation can help distribute short-term costs of hosting large and unexpected inflows more evenly across economies and improve long-term outcomes. ### Migration and refugee patterns, drivers, and recent trends - Global trends: - Flows, as a share of the global population, steadily increased from the late 1990s until the global financial crisis. - Movement between emerging market and developing economies has increased, particularly for refugees; flows between EMDEs now account for almost half of overall net flows. - During 2020–24, most gross flows were between economies within the same region and income group. - Drivers and push–pull factors: - Pull factors include higher standards of living, higher incomes, better health outcomes, stronger educational systems and institutions, safer environments, linguistic or cultural proximity, and family ties. - Push factors include geopolitical shocks, natural disasters, political instability, conflict, violence, persecutions, human rights violations, and deteriorating social and economic conditions. - Distributional facts: - About two-thirds of the stock of refugees are hosted in neighboring countries, with four out of the top five hosts being emerging market and developing economies. - Migration-related pressures and public discourse have coincided with deterioration in acceptance and tightening policies in several major destination economies. ### Evidence on policy spillovers and quantitative effects - Channels and mechanisms: - Spillovers operate through changes in labor supply, aggregate demand, congestion, and agglomeration. - Refugees tend to face higher barriers to integration and greater skills mismatches than migrants. - Empirical findings (global level): - Policy tightening that deters inflows by 20 percent in one set of economies can result in a significant deflection of people—increasing inflows to other economies by 10 percent cumulatively over five years. - Tighter policies that reduce migrant inflows by 20 percent over five years can be partly offset by a 30 percent increase in typically smaller inflows of refugees over the same period. - Deflected flows to the final destination—equivalent to an average increase in the immigrant share of its population of about 0.2 percentage points—are associated with a 0.2 percent increase in output after five years. - If other countries tighten only their refugee policies, the resulting diversion of refugees does not generate meaningful output gains in the final destination. - Stronger refugee integration policies can deliver better outcomes, notably among emerging market and developing economies. ### Model-based simulations and distributional effects - Simulation insights: - Policies that reduce legal migration inflows from selected origin economies are partly offset by an increase in refugees from those economies—particularly low-skilled refugees—and migrants are deflected toward bordering economies. - The cumulative economic impact in the short to medium term is a modest lowering of GDP in destination economies, with a small boost to output elsewhere because their labor supply increases. - In economies receiving deflected migrants or refugees, increased competition may reduce wages for some workers in the short term, while incomes of natives engaged in activities complementary to the skills of incoming migrants and refugees increase. - Policy levers and complementarities: - Improvements in behind-the-border integration policies, infrastructure investment, and active labor market policies can ease short-term congestion costs and enhance long-term benefits. - International cooperation can help redistribute short-term hosting costs and improve global outcomes relative to unilateral tightening. ### Policy recommendations and priorities - Improve integration of migrants and refugees to reduce skills mismatches and raise returns from inflows—especially important in emerging market and developing economies. - Prioritize productive public investment to relieve pressures on local services and infrastructure. - Promote private sector development to absorb additional labor supply and foster complementary job creation. - Consider international policy cooperation to distribute hosting burdens and associated costs more evenly across economies and to manage forced-displacement shocks more effectively. *International Monetary Fund | April 2025* ### 1. Change in Stock of Migrants and Refugees, Top 20 Destination ### 1. Change in Stock of Migrants and Refugees, Top 20 Destination ### Changes in stocks and top destinations - Panel shows top 20 destination economies with largest changes in migrant and refugee stocks from 2010 to 2024; diamonds show changes as shares of 2010 populations. (Country codes shown using ISO codes; AE = advanced economy; EMDE = emerging market and developing economy.) - Note: The result is based on only four reporting economies of origin in 2024: Afghanistan, the Islamic Republic of Iran, Iraq, and Syria. ### Labor market and fiscal implications - Migrants and refugees tend to have significantly lower age profiles than the native population (April 2020 WEO, Chapter 4; Box 3.2). - If well integrated into the labor force, migrants and refugees can: - generate economic gains that outweigh fiscal costs and even ease fiscal pressures (Clemens 2024; Box 3.3; April 2025 WEO, Chapter 2); - help contain (wage push) inflationary pressures by increasing labor supply, as observed across multiple sectors in advanced economies since the pandemic (Cheremukhin and others 2024). - Migrants can also contribute to inflationary pressures by raising demand (Manacorda, Manning, and Wadsworth 2012; April 2020 WEO, Chapter 4; Box 3.4). - Refugees frequently struggle to join the labor force or find employment that fully utilizes their skills; they often work in the informal sector even when language and culture are common (Alvarez and others 2022). - Benefits are larger, notably in the long term, when refugees are well integrated; complementarity of skills and strength of integration policies matter for EMDEs as well (Viseth 2021). ### Policy trends - Certain migration and refugee policies have become increasingly restrictive for the median economy in recent decades, driven by stocks of migrants/refugees, recent inflows, or failures to integrate. - External regulations tightened in some countries (e.g., skills targeting, minimum ages); internal regulations easing trend has stalled with greater cross-country variation; enforcement stringency (controls) increased though it has tapered off over time. - Sample for policy trend figures covers 33 OECD member countries (index range 0 = open, 1 = closed). ### Channels of spillovers from policy changes - Four main channels through which migration and refugee policy changes alter flows: - Categorical substitution: composition changes between migrants and refugees (targeted restrictions shifting pathways). - Destination substitution (deflection): migrants/refugees diverted to other destinations or stranded in transit economies. - Origin substitution: migrants/refugees from other origin economies fill gaps created by restrictions. - Origin suppression/deterrence: potential migrants discouraged from traveling. ### Empirical approach to estimating spillovers - Methods used: - Structural gravity model for globally consistent evaluation of flow changes, controlling for economic size, geography, trade linkages, multilateral resistance, and past migration flows; includes a shift-share instrument to measure exposure to policies of other destination economies. - Local projections (Jordà 2005) to estimate output effects for final destination economies in response to policy-induced immigration shocks. - Extended gravity model to estimate sensitivity of migrant and refugee categories to policy changes that specifically target either category. - A spatial dynamic general equilibrium model of trade and migration to analyze distributional implications of targeted policy tightening and the gains from international coordination. ### Key quantitative findings from the gravity model and projections - Destination substitution magnitude: - Tighter policies that deter 20 percent of migrant and refugee inflows in one set of destination economies lead to an increase of almost 10 percent in others over five years, all else equal. - These destination-substitution effects are slightly more pronounced for advanced economies than for EMDEs. - Regulation type and substitution: - Destination substitution effects are largest when internal regulations are tightened (making integration more challenging) and relatively modest when enforcement of controls is stricter. - Output effects: - A 2 percentage point rise in the share of deflected migrant and refugee inflows in the destination economy’s population is associated with an increase in output in that economy of about 2 percent over a five-year period. - The same 2 percentage point rise is also associated with a decline in output per worker of just under 0.2 percent over a five-year period (the latter estimate is not precisely estimated). - For the average destination economy—where inflows are close to 2 percent of the population—a 10 percent increase in inflows equates to an increase in output of about 0.2 percent. - Output effects hold regardless of which type of regulation tightens. - Categorical substitution toward refugees: - A tightening designed to reduce average annual migration flows by about 4 percent into a destination economy over one year can be partly offset with an increase of more than 25 percent in the typically smaller refugee inflows to that economy. - A tightening of refugee policies by a set of destinations—designed to reduce refugee inflows into those economies by 60 percent over one year—is associated with an increase in refugee inflows into other economies of close to 8 percent within one year. - Deflected refugee inflows resulting from stricter refugee policies elsewhere do not generate meaningful output gains on average, given absorption challenges; but where integration policies (naturalization, ease of movement) are stronger, output effects are much larger for EMDE destination economies. - Heterogeneity: - Additional flows are associated with output increases in advanced economies, whereas the output impact in EMDEs is muted when integration is not accounted for—reflecting advanced economies’ stronger capacity to absorb arrivals and their relatively smaller refugee inflows. - Caveats: - Migration and refugee flows may influence policies rather than the reverse; measurement error may exist due to lack of comprehensive bilateral migration policy data; gravity frameworks based on aggregate policy assessments may underestimate spillovers when policies target specific origin countries. ### Modeling exercises and policy implications - Two modeled exercises with the spatial dynamic general equilibrium model: 1. Distributional implications of targeted migration and refugee policy tightening and associated costs and benefits across economies over varying horizons (policies apply to both new and incumbent migrants). 2. Whether international coordination can generate better outcomes than unilateral policy changes by trading off potential short-term immigration costs for long-term benefits. - Policy implications highlighted by empirical and modeled results: - Stricter policies in some destinations can cause deflection and categorical substitution that raise inflows elsewhere, with nontrivial output effects depending on integration capacity. - Integration policies (internal regulations, naturalization, ease of movement) materially shape the economic returns from additional migrant and refugee inflows, especially in EMDEs. - International coordination could potentially improve outcomes relative to unilateral tightening, given the cross-border spillovers documented. *Sources: United Nations Department of Economic and Social Affairs; United Nations High Commissioner for Refugees; Immigration Policies in Comparison; Abel and Cohen 2019; Centre d’Études Prospectives et d'Informations Internationales; IMF staff calculations.* ### 1. Categorical Substitution in Response to Stricter Own Migration ### 1. Categorical Substitution in Response to Stricter Own Migration Policies ### Modeling framework and driving forces - Individuals choose whether and where to migrate and which pathway to use given policy and nonpolicy migration costs and real wages in destinations; wages reflect factors such as complementarity of migrants’ skills with those of residents. - Two opposing forces determine economic impacts: - Agglomeration: net inflows can raise total factor productivity through knowledge spillovers and increased entrepreneurship. - Congestion: increased strain on local services, businesses’ equipment and properties, and publicly provided infrastructure can lower capital per worker in the short to medium term. - Long-term outcomes depend on capital accumulation: economies that build capital can reap benefits of net migration flows and increase potential output per capita. - Empirical scope: figure/use of data for 194 economies over 1995 to 2020; whiskers show 90 percent confidence intervals (figure notes). ### Distributional implications of targeted migration policies (counterfactual exercise) - Policy shock assumed: tighter policies in a destination economy reduce the stock of migrants from targeted origin economies by 20 percent over the short to medium term relative to the baseline. - Direct quantitative effects: - 0.25 percent more of the native population remains in the origin economies (origin suppression). - Categorical substitution: low-skilled refugee flows increase by 4 percent; high-skilled refugee flows increase by 0.5 percent (relative to baseline). - Migrants account for 0.3 percent of the population from the origin countries and roughly half of that amount when measured in percent of the population in the destination economy. - The 20 percent reduction in economic migration is broadly comparable to the predicted outflows following a one-standard-deviation increase in labor migration indices from the Immigration Policies in Comparison (IMPIC) database. - Destination and origin substitution: - Increased flows to bordering alternative destinations are broad-based across migrants and refugees, larger for low-skilled refugees, which increase by 2 percent (from origin to bordering economies; destination substitution). - Implementing jurisdiction receives larger flows of low-skilled migrants and refugees from economies bordering the targeted destinations (origin substitution). - A higher share of high-skilled workers from bordering economies refrain from emigrating to take advantage of productivity gains from skill complementarities with deflected low-skilled workers and agglomeration. ### Economic (GDP and per capita) effects - Short to medium term (after five years): - Output in the implementing jurisdiction declines modestly by close to 7 basis points, partly due to smaller flows relative to baseline leading to reduced labor supply and agglomeration. - Origin and bordering economies see a small increase in output in the short to medium term. - Global output declines by about 2 basis points in the short to medium term (relative to baseline). - Long term: - Implementing jurisdiction output remains lower relative to baseline as capital accumulation slows and output per worker declines. - Targeted origin economies incur costs from lower output per worker in the long term, with capital accumulation—absent free capital mobility—insufficient to offset congestion effects. - Bordering economies are assumed able to replenish capital over the long term and experience higher output per worker relative to baseline due to stronger agglomeration and greater investment opportunities. - Global output declines by about 7 basis points over the long term (relative to baseline). ### Distributional (welfare and income) effects - Real income (lifetime compensating variation) and group impacts: - Native capital owners in the implementing jurisdiction: lower than baseline because of decline in labor supply and associated productivity losses. - Capital owners in origin and bordering economies: benefit relative to baseline. - Native low-skilled workers in the implementing destination economy: benefit from protection afforded by tighter migration controls. - Low-skilled workers in origin and bordering economies: depressed real incomes due to increased low-skilled labor there. - High-skilled workers in origin economies: adversely affected because of congestion and fewer opportunities to migrate. - High-skilled workers in destination economies: worse off relative to baseline because inflow of complementary low-skilled workers has decreased. - Migrants and refugees: lose in all locations from restricted mobility. ### Can cooperation improve outcomes for destination economies? (second exercise) - Baseline calibrated using a large historical episode of forced displacement; additional inflows impose short- to medium-term congestion costs. - Three scenarios relative to baseline: - Scenario 1: bordering emerging market and developing destination economies temporarily increase policy barriers to reduce short- to medium-term inflows by 25 percent relative to baseline. - Scenario 2: a large nonbordering advanced destination economy temporarily increases policy barriers to reduce short- to medium-term inflows by 25 percent relative to baseline. - Scenario 3 (cooperation): both destinations agree to take more inflows; each jurisdiction temporarily tightens policies to reduce short- to medium-term net inflows by 12.5 percent relative to baseline. - Outcomes: - In Scenarios 1 and 2 (unilateral tightening), tighter policies reduce congestion in each implementing jurisdiction in the short term, boosting per capita consumption relative to baseline, but shrink the labor force and lower aggregate consumption in the short to medium term; long-term costs arise from smaller agglomeration effects once capital adjusts. - In Scenario 3 (cooperation), both destinations experience more congestion in the short to medium term and stronger agglomeration effects in the long term; because the labor force does not shrink as much, aggregate consumption decreases by less over time and destination economies can coordinate to choose policies that produce stronger long-term benefits. - Timing note: “Short to medium term” refers to results for 2025; “long term” refers to results in 2075. ### Conclusions and policy implications (key findings and recommendations) - Key findings: - Changes in migration and refugee policies can have large and significant effects on flows both within and between economies; such flows constitute a small share of the population of advanced destination economies—averaging about 2 percent over five years. - Spillovers propagate globally primarily via destination substitution and categorical substitution. Altering the size and composition of legal migrant and refugee flows can impose short-term costs—particularly when flows are diverted to jurisdictions with challenging labor market integration or severe skill mismatches—but can offer long-term gains. - International cooperation can help distribute short-term hosting costs more evenly across countries and alleviate burdens on individual economies, benefiting emerging market and developing economies that tend to lack fiscal space and absorptive capacity. - Policy recommendations: - Improve integration of migrants and refugees to maximize gains for destination economies; integration challenges are often more severe for refugees than migrants due to unexpected scale and timing, delays in status determination, and limited access to local labor markets. - For emerging market and developing destination economies (which tend to receive a disproportionate share of refugees and see greater informal absorption), strengthen incentives to take up formal work through well-designed tax and transfer systems and improved access to public health and education services. - Minimize domestic barriers to occupational mobility; reduce administrative delays; provide language training; improve recognition and transferability of qualifications; provide access to job search services; invest in education for upskilling and (re)training of new entrants. - Prioritize productive public spending and structural reforms to alleviate congestion: public investment in infrastructure and health and education services to minimize strain from large inflows. - In the wake of unexpected refugee inflows, governments should work together to provide humanitarian support, services, and capacity development. - Complement domestic reforms with policies to increase private sector development to absorb inflows where fiscal space is limited. - Recognize limits of migration policy alone: restrictive policies can forfeit opportunities to boost productivity and potential output while shifting congestion burdens elsewhere; migration and refugee policies cannot fully address pressures from forced displacement or structural bottlenecks (including labor market imbalances from sectoral and demographic shifts). *Source: IMF staff calculations and text from the chapter "Categorical Substitution in Response to Stricter Own Migration Policies," World Economic Outlook: A Critical Juncture Amid Policy Shifts (April 2025).* ### CHAPTER 3 JOURNEyS AND JUNCTIONS: SPILLOvERS FROM MIgRATION AND REFUgEE POLICIES ### CHAPTER 3 JOURNEyS AND JUNCTIONS: SPILLOvERS FROM MIgRATION AND REFUgEE POLICIES ### Forced displacement: scale and drivers - In mid-2024, the stock of forcibly displaced persons reached a record high of 123 million globally. - The number of those internally displaced is "just over half" that total and marked its 12th consecutive year of increase. - Over the past 20 years, among the nearly 27 million internally displaced persons each year, about two-thirds of these displacements were triggered by natural disasters. - Forced displacement reflects a complex combination of push factors: conflict remains the primary driver, while climate change and natural disasters can contribute by aggravating vulnerabilities and inequalities. ### Conflict and displacement: characteristics and consequences - High-intensity conflicts can result in significant refugee flows that persist longer than those sparked by natural disasters. - Skilled and educated individuals are more likely to flee from violence, producing substantial brain drain. - Legal and administrative barriers in destination economies often limit refugees’ access to formal labor markets and basic services, pushing many into low-productivity, low-skill, and informal jobs and curtailing their economic contribution at destination. ### Natural disasters, habitability, and migration - Sudden-onset natural disasters (for example, storms and floods) can destroy homes and infrastructure and interrupt basic services, forcing people to flee. - Slower-onset phenomena (for example, sea-level rises, desertification, sustained decrease in rainfall, and temperature increases) progressively erode living conditions and livelihood opportunities, triggering displacement and potentially driving conflicts over resources and weakening social cohesion. - Natural disasters may also reduce household incomes and resources, thereby limiting people’s ability to migrate. - In Africa, natural disasters in migrants’ and refugees’ countries of origin are positively associated with migration and refugee flows—often to another African country. Higher precipitation levels and floods are identified as key push factors; refugee flows from landlocked African economies are also sensitive to temperature levels and anomalies. - Across emerging market and developing economies, natural disasters drive much of climatic shocks’ impact on economic outcomes; impacts are most prominent in small states where internal mobility is limited during natural disasters. ### Spillovers from forced displacement and hosting burdens - Most forced displacement occurs within (and between) emerging market and developing economies. - Nearly two-thirds of refugees under the United Nations High Commissioner for Refugees’ mandate and other people in need of international protection come from just four countries: Afghanistan, Syria, Ukraine, and Venezuela. - Nearly 73 percent of such refugees are hosted in emerging market and developing economies, with half the global total in just 10 such economies. - Concentration of refugees among emerging market and developing destination economies—including many with limited fiscal capacity—highlights challenges caused by poor integration. - Evidence suggests labor market outcomes of refugees are significantly worse than those of native populations and initially tend to generate net fiscal costs. - Host countries often experience higher fiscal deficits following refugee inflows; increases are associated with provision of health, education, and subsistence services. - Better integration of refugees can help alleviate fiscal pressures because improved labor market outcomes can help resolve labor shortages, boost tax revenues, and support aggregate demand and GDP growth. ### Demographics, migration, and the potential dividend - Globally, migrants and refugees are typically younger—with a larger proportion of them of working age—than natives: 78 percent of migrants and refugees are of working age, compared with only 63 percent of native populations. - Fertility rates of migrants are also higher than those of natives, providing a longer-term boost to the working-age population. - Advanced economies are projected to see old-age dependency rise from 20 older people for every 100 working-age individuals at the turn of the century to 50 by the end of 2050, an increase that effectively leaves one person over the age of 65 in the care of two working-age adults. - A flow of younger migrants and refugees into aging countries can partly alleviate labor-supply imbalances, easing pressures from a smaller labor force in destination economies and lack of opportunities in origin economies—conditional on a market-based match between migrants’ skills and destination economies’ needs. - Local projections show migration patterns broadly match countries’ comparative advantages in youth-dependent industries: a one-standard-deviation increase in a country’s comparative advantage with respect to youth-intensive trade is associated with higher net migration inflows. - The response of migration and refugee inflows to increased youth intensity of trade is greatest for aging countries. - More restrictive migration policies lower the elasticity of migration flows to the youth intensity of trade, potentially hindering efficient global allocation of labor and constraining alleviation of youth-related skills shortages in aging economies. ### Fiscal impacts of migration and integration challenges - The fiscal impact of immigration depends on destination-economy characteristics, migration pathways used, migrants’ age profile, the degree of complementarity of their skills with natives, and investment needs to ease public-services congestion. - In advanced economies, evidence exists that migrants and refugees have on average a more favorable net fiscal impact than that of natives. - Working-age immigrants provide a more positive fiscal boost than those outside working age. - A higher proportion of migrants are of working age than in native populations. - Fiscal contributions vary by migrant type and earnings: migrants who are highly educated (or more highly paid) and relatively young can place substantial downward pressure on budget deficits over their lifetimes, whereas migrants with fewer qualifications (or who are relatively lower paid) and older may induce net fiscal costs. - Once capital taxes paid by employers of immigrant labor are taken into consideration, benefits of working-age immigrants for fiscal outturns may be positive, even for immigrants who do not have a high school education. - In many emerging market and developing economies—often the largest recipients of refugee flows—integration challenges and skills mismatches can be more acute, resulting in constrained fiscal benefits from hosting migrants and refugees. - Refugees tend to have lower labor force participation rates than migrants, and cultural, legal, and structural barriers can drive refugees into informal employment with relatively lower fiscal benefits than formal-sector employment. - Short-term fiscal costs of hosting refugees can be sizable, especially when inflows are large and unexpected; better integration can reduce these costs and unlock economic and fiscal benefits over time. *Source: CHAPTER 3 JOURNEyS AND JUNCTIONS: SPILLOvERS FROM MIgRATION AND REFUgEE POLICIES.* ### Box 3.3. The Impact of Immigration on Government Finances ### Box 3.3. The Impact of Immigration on Government Finances ### Fiscal effects and integration dynamics - Overcoming constraints on the full economic participation of refugees could lower costs of assistance in low- and middle-income countries by about 75 percent (World Bank and UNHCR 2024). - The capacity to adapt to migrants and refugees and fully integrate them into the workforce determines how quickly economies benefit from higher labor income tax revenues and increasing returns to capital. - Where impediments to business investment (and to capital accumulation) exist, the full benefits from an increase in the supply of labor may be delayed (Caliendo and others 2023). - Integration challenges can produce congestion effects—greater demand for public services and infrastructure (for instance, access to health care and housing)—which may temporarily strain public finances. - Across generations, immigration can provide more pronounced benefits as: - first-generation immigrants better integrate, - capital adjusts, and - subsequent generations contribute to labor force growth, economic activity, productivity, and higher tax revenues (Sultanov 2021). - Descendants of immigrants generally tend to have more favorable net fiscal impacts, reflecting slightly higher educational achievements and higher wages and salaries (Blau and Mackie 2017). ### Empirical projections and country examples - US Congressional Budget Office projections: a multiyear wave of 6 million immigrants would reduce the US federal deficit by $0.9 trillion by 2034 (US CBO 2024). - UK Office for Budget Responsibility projection: an increase in annual net migration from 129,000 to 245,000 arrivals would reduce public debt as a share of GDP by 30 percentage points (UK OBR 2023). ### Migration, wages, and inflation channels - Migration affects inflation through multiple channels: - Increase labor supply, placing downward pressure on wages and therefore inflation; effects vary with speed of integration and labor market conditions (Bentolila, Dolado, and Jimeno 2008). - Increase demand for goods and services via local consumption, which can exert upward pressure on inflation in the short term if supply is inelastic. - Complementarities between capital and labor matter: stronger complementarity can enhance capital returns, boost investment, and—if capital adjusts slowly—generate an inflationary response. Effects may be muted where complementarities are lower (particularly relevant when migrants are low-skilled or skills are poorly matched) (Cheremukhin and others 2024). - Effects are smaller when capital in a destination economy is not used at full capacity. - Model simulation findings (across a range of countries, with Online Annex 3.4 and Figure references in source): - With capital able to adjust, a surge in high-skilled migration of about 0.7 percent of the population triggers a boost in investment such that demand effects dominate and inflation increases up to 0.25 percentage point within three years of the shock. - A similar surge in low-skilled migration has very little impact on inflation: increased aggregate consumption demand is offset by disinflationary effects of greater labor supply and muted investment due to limited complementarity between low-skilled migrant labor and capital. ### Distributional wage effects by skill - Model simulations on wages (Figure references in source): - Surge in low-skilled immigration: - Marginally increases wages of high-skilled native workers (their marginal product increases). - Decreases wages for low-skilled native workers slightly—by less than 1 percentage point over the long term. - Surge in high-skilled immigration: - Marginally decreases wages of high-skilled native workers—by up to 1.5 percentage points over the long term. - Slightly increases wages of low-skilled native workers over the long term. - Caveats and moderating factors: - Simulated downward pressure on wages for natives is modest and may be dampened in practice because of labor market frictions, downward nominal wage rigidities, imperfect substitutability between low-skilled migrants and low-skilled natives (Clemens and Lewis 2022), and migrant integration challenges. - Existing literature finds only very small effects of migration surges on native employment and wages (Card 1990), with heterogeneous effects across subgroups of the native workforce (Borjas 2015). - At the aggregate level, migration can have muted effects on wages and inflation, but significant effects can appear in subcomponents of the consumer goods basket and local prices (example: in the United States, higher rates of immigration are found to lower local goods inflation, but increase local housing and utilities inflation) (Barrett and Tan 2025). *Author of the box: Samuel Mann. Source: Box 3.3, Chapter 3, World Economic Outlook: A Critical Juncture Amid Policy Shifts, International Monetary Fund | April 2025.* ### CHAPTER 3 JOURNEyS AND JUNCTIONS: SPILLOvERS FROM MIgRATION AND REFUgEE POLICIES ### CHAPTER 3 JOURNEyS AND JUNCTIONS: SPILLOvERS FROM MIgRATION AND REFUgEE POLICIES ### Statistical Appendix: scope and structure - The Statistical Appendix comprises eight sections: Assumptions, What’s New, Data and Conventions, Country Notes, Classification of Economies, General Features and Composition of Groups in the World Economic Outlook Classification, Key Data Documentation, and Statistical Tables. - Statistical Appendix A is included in the printed volume; Statistical Appendix B is available online. - Data in the tables have been compiled on the basis of information available through April 14, 2025. - Figures for 2025–26 are shown with the same degree of precision as historical figures for convenience; as projections, the same degree of accuracy is not to be inferred. ### Assumptions underlying 2025–26 estimates and projections - Real effective exchange rates for advanced economies are assumed to remain constant at their average levels measured during March 6, 2025–April 3, 2025. - These assumptions imply average US dollar–special drawing right conversion rates of 1.328 and 1.336 for 2025 and 2026, respectively. - US dollar–euro conversion rates of 1.077 and 1.083 for 2025 and 2026, respectively. - Yen–US dollar conversion rates of 149.2 and 146.1 for 2025 and 2026, respectively. - Oil price assumptions: $66.94 a barrel in 2025 and $62.38 a barrel in 2026. - Interest rate assumptions: - Three-month government bond yield averages: - United States: 4.2 percent in 2025 and 3.5 percent in 2026. - Euro area: 2.2 percent in 2025 and 2.1 percent in 2026. - Japan: 0.5 percent in 2025 and 0.8 percent in 2026. - Ten-year government bond yield averages: - United States: 4.2 percent in 2025 and 3.8 percent in 2026. - Euro area: 2.6 percent in 2025 and 2.7 percent in 2026. - Japan: 1.4 percent in 2025 and 1.6 percent in 2026. - National authorities’ established policies are assumed to be maintained. - Box A1 (not reproduced here) describes more specific policy assumptions for selected economies. ### What’s New (database changes and exclusions) - For Bolivia, projections for 2027–30 have been omitted because of significant uncertainty regarding the economic outlook. - For Ecuador, fiscal projections for 2025–30 are excluded from publication because of ongoing program discussions. ### Data and conventions (coverage, standards, and aggregation rules) - Data and projections cover 196 economies in the WEO database. - The WEO database reflects information from national statistical agencies and international organizations; most macroeconomic data broadly conform to the 2008 version of the System of National Accounts (SNA 2008). - IMF sector statistical standards referenced: BPM6, Monetary and Financial Statistics Manual and Compilation Guide, and Government Finance Statistics Manual 2014 (GFSM 2014), aligned with SNA 2008. - Fiscal gross and net debt data are drawn from official sources and IMF staff estimates; attempts are made to align with GFSM 2014 but deviations can occur. - Composite data rules: - Country group composites are either sums or weighted averages of individual country data. - Multiyear averages of growth rates are expressed as compound annual rates of change unless noted otherwise. - Arithmetically weighted averages are used for all data for the emerging market and developing economies group—except data on inflation and money growth, for which geometric averages are used. - Composites for exchange rates, interest rates, and growth rates of monetary aggregates are weighted by GDP converted to US dollars at market exchange rates (averaged over the preceding three years) as a share of group GDP. - Composites for other domestic-economy data are weighted by GDP valued at purchasing power parity as a share of total world or group GDP. - Aggregation of inflation: advanced economies use simple percent changes from previous years; world and emerging market and developing economies use logarithmic differences. - Composites for real GDP per capita (PPP terms) are sums of individual country data after conversion to international dollars. - Composites for fiscal data are sums of individual country data after conversion to US dollars at average market exchange rates in the years indicated. - Composite unemployment rates and employment growth are weighted by labor force as a share of group labor force. - External sector composites: sums of individual country data after conversion to US dollars at average market exchange rates for balance of payments data and at end-of-year market exchange rates for debt denominated in currencies other than US dollars. - Composites of changes in foreign trade volumes and prices are arithmetic averages of percent changes for individual countries weighted by the US dollar value of exports or imports as a share of total world or group exports or imports (in the preceding year). - Group composites are computed if 90 percent or more of the share of group weights is represented. - Unless noted otherwise, composites for all sectors for the euro area are corrected for reporting discrepancies in transactions within the area. - Unadjusted annual GDP data are used for the euro area and the majority of individual countries, except Cyprus, Ireland, Portugal, and Spain, which report calendar-adjusted data. - For data prior to 1999, data aggregations apply 1995 European currency unit exchange rates. - Data refer to calendar years except for a few countries using fiscal years; Table F (not reproduced here) lists exceptions. - Some figures for 2024 and earlier are based on estimates rather than actual outturns; Table G (not reproduced here) lists dates of latest actual outturns for each country. ### Country notes (selected entries and notable numeric points) - Afghanistan: - Data for 2021–23 are reported for selected indicators, with estimates for fiscal data. - Estimates and projections for 2024–30 are omitted owing to unusually high uncertainty and paused IMF engagement. - WEO data contain a structural break in 2021 due to reporting change; the actual reported GDP growth rate for solar year 2021 is –20.7 percent. - Algeria: Total government expenditure and net lending/borrowing include net lending by the government, reflecting support to the pension system and other public sector entities. - Argentina: Notes on CPI series discontinuities and labor market data gaps for 2014–16 and 2015–16, and data series changes starting in December 2016 and second quarter 2016. - Bolivia: Projections for 2027–30 omitted because of significant uncertainty regarding the economic outlook. - Costa Rica: Central government definition expanded as of January 1, 2021, to include 51 public entities; data back to 2019 are adjusted for comparability. - Dominican Republic: Fiscal series coverage specified (consolidated public sector vs. central government) for particular indicators. - Ecuador: Fiscal projections for 2025–30 excluded from publication because of ongoing program discussions. - Eritrea: Data and projections for 2020–30 are excluded from the database because of constraints in data reporting. - India: Real GDP growth rates calculated in accordance with national accounts base year 2011/12. - Iran: Nominal GDP in US dollars uses official exchange rate up to 2017 and NIMA exchange rate from 2018 onward for conversion; IMF staff assesses NIMA better reflects transaction-value-weighted exchange rate. - Israel: Projections subject to heightened uncertainty owing to the conflict in the region and may undergo revisions. - Lebanon: Fiscal and national accounts data for 2022–24 and debt data for 2023–24 are IMF staff estimates; estimates and projections for 2025–30 are omitted owing to unusually high uncertainty. - Sierra Leone: Currency redenomination on July 1, 2022; local currency data are expressed in the old leone for the April 2025 WEO. - Sri Lanka: Data and projections for 2025–30 are excluded from publication owing to ongoing discussions on restructuring of sovereign debt. - Sudan: Projections reflect IMF staff analysis assuming the ongoing conflict will terminate by the end of 2025 and that reengagement and reconstruction will commence shortly thereafter; data for 2011 exclude South Sudan after July 9; data for 2012 onward pertain to the current Sudan. - Syria: Data are excluded from 2011 onward because of the uncertain political situation. - Timor-Leste: Published real GDP data refer to non-oil real GDP, while published nominal GDP refers to total nominal GDP. - Turkmenistan: Real GDP data are IMF staff estimates compiled in line with SNA; fiscal balance estimates and projections exclude receipts from domestic bond issuances and privatization operations, consistent with GFSM 2014; authorities’ official estimates include these receipts. - Ukraine: Revised national accounts data available for 2000 onward and exclude Crimea and Sevastopol from 2010 onward. - Uruguay: - Authorities began reporting national accounts data according to SNA 2008 with base year 2016; new series begin in 2016. - Starting in October 2018 Uruguay’s public pension system received transfers recorded as revenues; these transfers affected data for 2018–22 and amounted to 1.2 percent of GDP in 2018 and 1.0 percent of GDP in 2019. *International Monetary Fund | April 2025* ### 0.6 percent of GDP in 2020, 0.3 percent of GDP in ### text - 0.6 percent of GDP in 2020, 0.3 percent of GDP in ### Data coverage and country-specific notes - Uruguay: Coverage of fiscal data changed from consolidated public sector to nonfinancial public sector with the October 2019 WEO. Nonfinancial public sector includes the central government, local government, social security funds, nonfinancial public corporations, and Banco de Seguros del Estado. Historical data were revised accordingly. Under the narrower perimeter—excluding the central bank—assets and liabilities held by the nonfinancial public sector for which the counterpart is the central bank are not netted out in debt figures. Capitalization bonds issued in the past by the government to the central bank are now part of the nonfinancial public sector debt. (See: Staff Report for the 2018 Article IV Consultation, Country Report 19/64.) - Venezuela: Projection and assessment of the economic outlook are hindered by lack of discussions with authorities (most recent Article IV consultation took place in 2004), incomplete metadata, and difficulties reconciling reported indicators with economic developments. Fiscal accounts include the budgetary central government; social security; FOGADE; and a reduced set of public enterprises, including Petróleos de Venezuela, S.A. Methodological upgrades to achieve a more robust nominal GDP led to revisions of historical data and indicators expressed as a percentage of GDP from 2012 onward. For most indicators, data for 2018–24 are IMF staff estimates. Venezuela’s consumer prices are excluded from all WEO group composites. - West Bank and Gaza: Estimates and projections for 2024–30 are excluded from publication owing to an unusually high degree of uncertainty. Latest actual annual data for consumer prices are for 2024. Annual unemployment rate data are available up to 2022. - Zimbabwe: Authorities redenominated national accounts statistics following introduction on April 5, 2024 of a new national currency, the Zimbabwe gold, replacing the Zimbabwe dollar. The use of the Zimbabwe dollar ceased on April 30, 2024. - Pension-system disclaimer: The disclaimer about the public pension system applies only to the revenues and net lending/borrowing series. ### Economy classification framework (WEO) - Two major groups: Advanced economies and Emerging market and developing economies. - Counts: - Advanced Economies: 41 - Emerging Market and Developing Economies: 155 - Purpose: The classification is not based on strict criteria and has evolved; it is intended to facilitate analysis by organizing data meaningfully. - Some economies are outside the classification and not monitored by the IMF (examples cited: Cuba and the Democratic People’s Republic of Korea). ### Group composition and subgroups - Advanced-economy subgroups: - Major advanced economies (the seven largest by GDP at market exchange rates): United States, Japan, Germany, France, Italy, the United Kingdom, and Canada (often referred to as the Group of Seven). - Euro area members are distinguished as a subgroup; euro-area composites cover current members for all years. - Emerging market and developing economies regional breakdowns: Emerging and developing Asia; Emerging and developing Europe; Latin America and the Caribbean; Middle East and Central Asia (subgroups: Caucasus and Central Asia; Middle East, North Africa, Afghanistan, and Pakistan); and Sub-Saharan Africa. - Analytical groupings: - By source of export earnings: Fuel; Nonfuel; Of which, Primary Products. Criterion: an economy is assigned to a category if its main source of export earnings exceeded 50 percent of total exports on average between 2019 and 2023. - By external financing source and debt status: Net creditor economies; Net debtor economies; Heavily Indebted Poor Countries (HIPCs); Low-Income Developing Countries (LIDCs); Emerging Market and Middle-Income Economies (EMMIEs). - Net debtor economies: latest net international investment position, where available, was less than zero OR current account balance accumulations from 1972 (or earliest available data) to 2023 were negative. - During 2019–23, 43 economies incurred external payments arrears or entered into official or commercial bank debt-rescheduling agreements (this group is referred to as economies with arrears and/or rescheduling during 2019–23). - LIDC per-capita threshold reference: based on $2,700 in 2017 as measured by the World Bank’s Atlas method; updated following new information in early 2024. ### Metadata, exceptional reporting periods, and documentation - Table F highlights economies with exceptional reporting periods (examples include Afghanistan Apr/Mar national accounts; Bangladesh Jul/Jun national accounts and government finance; India Apr/Mar national accounts and government finance). - Table G provides key data documentation (currency, historical data source, latest actual annual data, base year, national accounts system in use, and CPI data sources) for individual economies (extensive country-level entries for all economies are provided in the Statistical Appendix). - Notes on government finance subsector coverage and accounting practice are tabulated: subsector labels include CG (central government), LG (local government), SS (social security fund), NFPC (nonfinancial public corporation), NMPC (nonmonetary financial public corporation), MPC (monetary public corporation, including central bank), SG (state government), TG (territorial governments), BCG (budgetary central government); accounting practice codes: A = accrual, C = cash, CB = commitments basis, Mixed = combination. ### Fiscal, monetary, and projection assumptions (Box A1) - Fiscal policy assumptions: - Short-term assumptions based on officially announced budgets, adjusted for IMF staff macroeconomic assumptions and projected fiscal outturns; when no budget available, projections incorporate policy measures judged likely to be implemented. - Medium-term projections based on judgment about the most likely policy path; where insufficient information, an unchanged structural primary balance is assumed unless indicated otherwise. - Country-specific notes provided (selected examples): Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Denmark, France, Germany, Greece, Hong Kong SAR, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Mexico, Netherlands, New Zealand, Portugal, Puerto Rico, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Türkiye, United Kingdom, United States. Projections draw on budgets, medium-term plans, fiscal rules, and IMF staff judgment as detailed per country. - Monetary policy assumptions: - Based on established policy frameworks; generally nonaccommodative over the business cycle (official interest rates increase if inflation expected above acceptable rate/range, decrease if below and substantial slack). - Assumptions draw on central bank communications, market expectations, and model outputs (examples cited for many economies, including Argentina, Australia, Brazil, Canada, Chile, China, Denmark, Euro area (models and ECB communications), Hong Kong SAR (currency board intact), India (RBI inflation target), Japan (Bank of Japan communications), Korea (forward guidance), Russia (tight stance), Saudi Arabia and Singapore (exchange rate peg and broad money link), South Africa (3–6 percent target band), Türkiye (contractionary stance), United Kingdom and United States (IMF staff assessments and expectations)). - Box A2: Medium-term projection revisions: - Medium-term projections revised for a long list of economies based on developments in commodity markets and international trade as of April 4, 2025 (an explicit list of economies is provided in Box A2). *Source: World Economic Outlook — Statistical Appendix, April 2025* ### Annex 1.SF.1 ### Annex 1.SF.1 ### Overview - The following remarks were made by the Chair at the conclusion of the Executive Board’s discussion of the Fiscal Monitor, Global Financial Stability Report, and World Economic Outlook on April 11, 2025. - Executive Directors broadly agreed with staff’s assessment that the global economy is at a critical juncture, with significant internal and external imbalances and vulnerabilities. - Directors noted major policy shifts are underway, generating a new wave of uncertainties with potentially significant implications for the functioning of the global economy. ### Risks to the Global Outlook and Financial Stability - Global financial conditions have tightened, with near‑term financial stability risks (as gauged by IMF’s Growth‑at‑Risk metric) rising. - Key vulnerabilities highlighted: - Further correction of asset prices (with geopolitical risks being a potential trigger). - The ongoing increase in leverage and interconnectedness in the financial system, especially among certain non‑bank financial intermediaries (NBFIs) receiving strong investment flows in recent years. - Still‑rising sovereign debt levels. - Directors noted risks to the outlook are firmly tilted to the downside. - Escalating protectionism and elevated policy uncertainty could further reduce near‑ and long‑term growth in a low‑growth, high‑debt environment. - Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger more abrupt repricing of assets and sharp adjustments in foreign exchange rates and capital flows, especially for emerging market and developing economies. - On the fiscal side, escalating uncertainty and unexpectedly high interest rates may lead to a significant increase in global public debt, particularly due to rising expenditures on defense and declining revenues linked to output uncertainty from tariffs. - Higher interest rates could limit key development spending and exacerbate financing risks in low‑income developing countries, including against the background of declining official development assistance. - More limited international cooperation on common challenges could hinder progress toward building a more resilient global economy and addressing development needs. ### Monetary Policy Guidance - Directors called on central banks to carefully fine‑tune monetary policy to achieve their mandates and ensure price stability. - Monetary policy should remain data‑dependent and clearly communicated to anchor expectations. - Where near‑term inflation risks are tilted to the upside or inflation expectations are rising: - Future cuts to the policy rate should remain contingent on evidence that inflation is heading decisively back toward target. - Policymakers should ensure that financial stability is not compromised. - Central banks should stand ready to act forcefully if inflation risks materialize. - Major emerging markets have proved remarkably resilient, but abrupt sell offs in global markets, potential divergence in monetary policy paths, high trade policy and economic policy uncertainty could tighten their financial conditions and raise currency volatility. - Emerging markets may require adoption of measures to mitigate disruptive capital outflows; the IMF’s Integrated Policy Framework provides a toolkit for responses tailored to country‑specific circumstances. ### Financial Regulation, Macroprudential Policy, and NBFI Risks - Directors emphasized full, timely and consistent implementation of Basel III and other internationally agreed bank regulatory standards to ensure a level playing field and guarantee ample and adequate capital and liquidity. - The growing nexus between banks and NBFIs calls for supervisors to enhance the risk assessment of such linkages. - Continued buildup of debt and elevated economic uncertainty underscore the need to strengthen macroprudential policy frameworks to contain excessive risk taking in the NBFI sector. - Ensure capital and liquidity buffers in banking systems are adequate to support the provision of credit through periods of stress. - Directors emphasized the importance of macroprudential buffers and strong crisis preparedness and resolution frameworks to mitigate shocks. ### Fiscal Policy Recommendations - Call for gradual and growth‑friendly fiscal adjustment within a credible medium‑term framework to: - Reduce debt. - Rebuild fiscal buffers. - Accommodate priority spending while protecting the vulnerable. - For economies with limited fiscal space: reprioritize public spending within planned budgets. - For economies with room for fiscal maneuver: use some of the available space, if appropriate, within well‑defined medium‑term fiscal frameworks. - Advanced economies should: - Prioritize expenditure reforms. - Advance pension and healthcare reforms. - Eliminate ineffective tax incentives. - Expand tax bases by removing exemptions to improve tax expenditure efficiency. - For countries facing new spending needs (for example, in defense): demonstrate a strong commitment to upholding the integrity of existing fiscal rules while ensuring transparency. - Emerging market and developing economies should: - Enhance revenues through tax system reforms and improved revenue administration. - Phase out energy subsidies. - Streamline public wage bills while safeguarding public investment and upgrading social safety nets. ### Structural Reforms and International Cooperation - Directors emphasized the need for fiscal and structural reforms to enhance growth potential. - Highlighted policy priorities given demographic shifts: - Increase labor force participation among women and older workers. - Implement pension reforms. - Effectively address migration challenges. - Renewable energy sources and innovative production paradigms could help countries reap the benefits of advancements in artificial intelligence without escalating electricity prices. - Economic activity benefits from clear and transparent trade policies that stabilize expectations for businesses and consumers while minimizing volatility. - Continued cooperation across trade, industrial policy, international taxation, climate, and development and humanitarian assistance can help mitigate global spillovers and protect vulnerable populations. *IMF EXECUTIVE BOARD DISCUSSION OF THE OUTLOOK, APRIL 2025* --- _Source: https://www.imf.org/-/media/files/publications/weo/2025/april/english/text.pdf_