Policy Papers

The world economy is at a pivotal juncture. At the center are shifting policy priorities by major economies and escalating trade tensions, in the face of high public debt, weak medium-term growth prospects, and transformative forces reshaping the economic landscape. In this context, the economic outlook is highly uncertain, with intensifying downside risks. Based on information available as of April 4, 2025, global growth is projected to fall significantly while headline inflation is expected to further decline, though at a slightly slower pace than expected earlier. Many low-income developing countries (LIDCs) face the added challenge of collapsing aid flows. While growth in LIDCs is expected to further improve in the aggregate, the rate of per capita growth is projected to decline in 2025-26. Moreover, of the 20 fastest growing countries in the world in 2024, around half were LIDCs—yet many of the poorer LIDCs have seen virtually no progress in per capita incomes over the past 15 years. In the current environment of elevated uncertainty and frequent shocks, policies should be geared towards enhancing economic and financial stability, rebuilding buffers, and improving growth potential. Countries should also renew their focus on addressing internal and external macroeconomic imbalances, which can help enhance stability internally, externally, and globally. Multilateral cooperation remains essential to deliver sustained growth and meet global challenges.