## EXECUTIVE SUMMARY

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### Global context and recent policy shifts
- The rules of the global economy are in flux; newly introduced policy measures are "slowly coming into focus, and growth prospects are shifting along with them."
- The United States introduced higher tariffs starting in February; "subsequent deals and resets have tempered some extremes."
- Substantial cuts to international development aid and new restrictions on immigration have been rolled out in some advanced economies.
- Several major economies have adopted a more stimulative fiscal stance, raising concerns about "the sustainability of public finances and possible cross-border spillovers."
- The global landscape is marked by greater protectionism and fragmentation, "with dim medium-term growth prospects and calling for a recalibration of macroeconomic policies."

### Recent data and dynamics
- Incoming data in the first half of 2025 showed robust activity; inflation in Asian economies was subdued, while it "remained steady in the United States."
- Much of the apparent resilience is attributed to temporary factors: "front-loading of trade and investment and inventory management strategies."
- As temporary factors fade, "weaker data are surfacing. The front-loading is unwinding, and labor markets are softening."
- Pass-through of tariffs to US consumer prices, previously muted, "appears increasingly likely."
- Advanced economies are seeing "sharp declines in net labor inflows," with implications for potential output.

### Growth, inflation, and trade projections (numerical highlights)
- Global growth:
  - "Global growth is projected to slow from 3.3 percent in 2024 to 3.2 percent in 2025 and to 3.1 percent in 2026."
  - On an end-of-year basis, "global growth is projected to slow down from 3.6 percent in 2024 to 2.6 percent in 2025."
  - The current projection is "cumulatively 0.2 percentage point below forecasts made before the policy shifts in the October 2024 WEO."
- Advanced and emerging economies:
  - "Advanced economies are forecast to grow about 1½ percent in 2025–26, with the United States slowing to 2.0 percent."
  - "Emerging market and developing economies are projected to moderate to just above 4.0 percent."
- Inflation:
  - "Inflation is expected to decline to 4.2 percent globally in 2025 and to 3.7 percent in 2026."
  - Notable variation: "above-target inflation in the United States—with risks tilted to the upside—and subdued inflation in much of the rest of the world."
- World trade:
  - "World trade volume is forecast to grow at an average rate of 2.9 percent in 2025–26—boosted by front-loading in 2025 yet still much slower than the 3.5 percent growth rate in 2024—with persistent trade fragmentation limiting gains."

### Downside and upside risks
- Downside risks (listed):
  - Prolonged policy uncertainty could dampen consumption and investment.
  - Further escalation of protectionist measures, including nontariff barriers, could "suppress investment, disrupt supply chains, and stifle productivity growth."
  - Larger-than-expected shocks to labor supply from restrictive immigration policies could reduce growth, especially in economies with aging populations and skill shortages.
  - Fiscal vulnerabilities and financial market fragilities may interact with rising borrowing costs and increased rollover risks for sovereigns.
  - An abrupt repricing of tech stocks could be triggered by disappointing results on earnings and productivity gains related to artificial intelligence (AI), "marking an end to the AI investment boom and the associated exuberance of financial markets," with possible broader macrofinancial implications.
  - Pressure on the independence of key economic institutions, such as central banks, could erode policy credibility and undermine decision making, including as a result of reduced data reliability.
  - Commodity price spikes—stemming from climate shocks or geopolitical tensions—pose risks, especially for low-income, commodity-importing countries.
- Upside scenarios:
  - A breakthrough in trade negotiations could "lower tariffs and reduce uncertainty."
  - Renewed reform momentum could "give a boost to medium-term growth."
  - "Faster productivity growth because of AI could bring economy-wide gains."

### Policy priorities and recommendations
- Restore confidence through "credible, predictable, and sustainable policy actions."
- Trade policy:
  - Establish "clear, transparent, and rules-based trade policy road maps to reduce uncertainty and support investment."
  - Modernize trade rules "for the digital age" and pursue stronger multilateral cooperation.
  - Pair trade diplomacy with macroeconomic adjustment to correct persistent external imbalances.
- Fiscal policy:
  - Rebuild fiscal buffers and safeguard debt sustainability.
  - Medium-term fiscal consolidation should involve "realistic, balanced plans that combine spending rationalization and revenue generation."
  - Any new support measures should be "temporary, well-targeted, and offset by clear savings."
- Monetary policy and institutions:
  - Calibrate monetary policy "to balance price stability and growth risks, in line with central banks’ mandates."
  - Preserve the independence of central banks to anchor inflation expectations and enable them to achieve their mandates.
- Structural reforms and resilience:
  - Embrace reform without delay to "enhance resilience as a new global economic landscape takes shape."
  - Redouble efforts on structural reforms: "promoting labor mobility, encouraging workforce participation, investing in digitalization, and strengthening institutions."
  - Chapter 3 note: "industrial policy may have a role in improving resilience and growth, but full consideration should be given to opportunity costs and trade-offs involved in its use."
  - For low-income countries, mobilize domestic resources "including through governance and administrative reforms" as external aid declines.
- Preparedness:
  - In times of uncertainty, use scenario planning and predesigned policy playbooks to improve preparedness and credibility, ensuring timely and effective policy responses.

*Source: EXECUTIVE SUMMARY, World Economic Outlook: GLOBAL ECONOMY IN FLUX, PROSPECTS REMAIN DIM (October 2025).*

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_Source: https://www.imf.org/-/media/files/publications/weo/2025/october/english/execsum.pdf_