Global Growth in an Uncertain Era
The global economy is undergoing a period of highly uncertain transformation, facing the dual challenges of short-term disruptions and long-term structural adjustments. At the regional level, economic performance is significantly diverging: the US outlook is bleak with persistent inflationary pressures; Europe, while experiencing fragile growth, is showing signs of improvement; while emerging regions such as sub-Saharan Africa and the Middle East and North Africa are demonstrating stronger development momentum. The report also provides an in-depth analysis of the long-term restructuring of the global order, identifying trade reshaping, fiscal imbalances, and AI-driven technological change as the three major systemic forces reshaping the global order. Global economic growth is expected to slow significantly from 2025 to 2027. Baseline forecasts indicate that the global economic growth rate will fall from the previously expected 2.8% to 2.5%, with global output growth projected at only 2.3% in 2025 and 2026, before slightly recovering to 2.9% in 2027. This is a consequence of the ripple effects of US tariff policies, geopolitical risks, and broader economic policy uncertainties.
Risks to the Economic Outlook
In the medium term, the risks to the economic outlook are skewed to the downside, with global economic growth projected to be below the 2025-2026 average, compared to a five-year earlier forecast of around 3%. In contrast, short-term risks are likely to exacerbate divergences among economies: short-term risks for the US are skewed to the upside; while most other economies face downside risks due to significant policy uncertainty and the headwinds of current adjustments (particularly the energy adjustment in Europe and the real estate adjustment in China). For example, an escalation of protectionist policies leading to a new wave of tariffs could exacerbate trade tensions, reduce investment, impair market efficiency, distort trade flows, and disrupt supply chains again. Both short- and medium-term economic growth could be impacted, but to varying degrees across different economies.
Driven by new expansionary measures such as tax cuts, a more accommodative fiscal policy in the US could boost economic activity in the short term and have a small positive spillover effect on global growth. However, in the longer term, this could require larger-scale fiscal policy adjustments, which could disrupt markets and the economy through various means, such as weakening the role of US Treasuries as a global safe-haven asset. Furthermore, the increased borrowing required for looser fiscal policy could boost global demand for capital, leading to higher interest rates and potentially dampening economic activity in other regions.
US confidence and positive sentiment (partly driven by deregulation) could simultaneously boost both demand and supply in the economy. Easing overly stringent regulations and reducing corporate red tape could increase investment, thereby stimulating short-term growth in the US; however, a stronger dollar could exacerbate capital outflow risks from emerging markets and developing economies and push up risk premiums. Moreover, excessive removal of regulations designed to limit risk-taking and debt accumulation could exacerbate boom-bust volatility in the US in the long term and have repercussions for the rest of the world. A weakening fiscal outlook or stalled progress on structural reforms could amplify downside risks to macroeconomic and financial stability. Other supply-side shocks, such as labor market disruptions due to reduced immigration to the US, could permanently reduce potential output and increase inflation during the adjustment period.
Key Characteristics: Low Growth, High Differentiation, Strong Resilience
Downward Shift in Growth Center
The United Nations, the World Bank, and other institutions predict that global economic growth in 2025 will be only 2.3%-3.2%, significantly lower than the historical average of 3.7% from 2000 to 2019. Specifically, developed countries will experience weak growth (US 1.0%-1.4%, Eurozone 0.7%-1.0%), while emerging markets and developing economies (such as India 6.5%, Southeast Asia 5.6%) will become the main engines of growth.
Significant Regional and Industrial Differentiation
- Regional Level: Asia (especially South Asia) and Africa will experience relatively strong economic growth, while North America and Europe face the risk of recession.
- Industry Level: Digital service trade (such as cloud computing and cross-border e-commerce) will maintain double-digit growth, while traditional manufacturing and commodity trade will be impacted by tariffs and supply chain restructuring.
Enhanced Policy Resilience and Market Adaptability
Countries have buffered downward pressure through loose monetary policies (such as the Federal Reserve's resumption of quantitative easing) and fiscal stimulus (such as China's issuance of special treasury bonds). The private sector has enhanced its resilience through supply chain diversification (such as companies setting up factories in Mexico and Hungary to avoid tariffs) and technological innovation (such as AI optimizing production processes).
Response Strategies: From Passive Adaptation to Proactive Planning
National Level: Policy Coordination and Structural Reform
- Fiscal and Monetary Balance: The IMF calls on countries to "rebuild fiscal space" (such as reducing debt and optimizing budgets) while maintaining monetary policy flexibility (such as emerging markets needing to balance inflation and exchange rate stability).
- Trade Diversification: Strengthening South-South cooperation (such as a 12% increase in trade between China and ASEAN by 2025) reduces dependence on a single market.
- Technological Self-Reliance and Control: Developing countries are increasing investment in digital infrastructure and green energy (such as India's renewable energy capacity target of 500GW by 2025).
Enterprise Level: Technology Strategy and Supply Chain Resilience
- Technology-Driven Transformation: Upgrading AI and big data from "tools" to "strategic cores" (e.g., Tesla's fully self-developed autonomous driving system, building technological barriers).
- "Strategic Enclave" Model: Establishing production bases in key markets (e.g., Mexico, Hungary) to circumvent tariff barriers (e.g., an industrial company entering the US market through a Mexican factory with low tax rates).
- Dynamically Adjusting Production Capacity: Flexibly allocating resources based on the degree of uncertainty (e.g., reducing long-term investment and optimizing short-term production plans).
Global Level: Multilateral Cooperation and Rule Restructurin
Strengthening the WTO dispute settlement mechanism and promoting tariff negotiations (e.g., IMF estimates that if tariffs are reduced to half of the May 2025 level, global growth could increase by 0.2 percentage points); Coordinating climate policies and energy security to avoid "de-globalization" exacerbating economic fragmentation.
Conclusion
Multilateral cooperation is crucial for curbing global fragmentation, maintaining growth and stability, and addressing global challenges. National trade policies should be aligned with the legal framework of the World Trade Organization (WTO) and should be clear and transparent to reduce uncertainty, market volatility, and distortions. Priority should be given to restoring a full and well-functioning WTO dispute settlement mechanism to create a level playing field and ensure that the desire for resilience among nations is clear and consistent within the rules-based multilateral trading system.
previous post
Is the Global Economy More Fragile Than It Looks?
Related Articles
