Global Economic Uncertainty Remains Elevated, Weighing on Growth

IMF Blog, January 26, 2023

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Successive shocks—ranging from Brexit and US-China trade tensions to the pandemic and war—have combined to keep uncertainty elevated.
Elevated uncertainty “in turn hurts economic growth” as IMF research shows.
The World Uncertainty Index was updated to provide monthly readings instead of quarterly, covering 71 economies and dating back to 2008.
The index “fell in December, the most recent reading,” but has “continued to hit elevated levels” due to successive shocks, including Russia’s invasion of Ukraine and the associated cost-of-living crisis.
Major historical jumps in uncertainty:
- After the United Kingdom’s unexpected vote to leave the European Union (Brexit).
- After the surprise outcome of the 2016 presidential election in the United States.
- During US trade tensions with China.
- Early 2020 with the onset of the coronavirus pandemic.
- Less than two years later with another shock from Russia’s invasion of Ukraine and renewed trade uncertainty associated with the risk of geoeconomic fragmentation.

The approach uses a text analysis of reports by the Economist Intelligence Unit.
It classifies sources of uncertainty by analyzing which words have been published in close proximity to mentions of uncertainty.
The authors state it is “the first effort to construct a text-based monthly measure of uncertainty covering many developing countries and being comparable across countries.”

The interactive chart includes a second slide that breaks down the composition of uncertainty mentions linked to:
- Trade
- The pandemic
- Spillovers from major economies
- Russia’s war in Ukraine
This decomposition illustrates how drivers of uncertainty have evolved over time.

Elevated uncertainty has become a “new normal for turbulence” which is partly driven by political fragmentation between countries.
The sequence of shocks has produced recurring spikes that weigh on global economic growth.
Recent drivers include Russia’s invasion of Ukraine and the associated cost-of-living crisis, contributing to continued elevated uncertainty.

IMFBlog is “a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.”
The IMF is based in Washington D.C. and is “an organization of 191 countries, working to foster global monetary cooperation and financial stability around the world.”
The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

Source: IMF Blog post “Global Economic Uncertainty Remains Elevated, Weighing on Growth,” January 26, 2023.