Global growth is slowing due to a substantial rise in trade barriers and the pervasive effects of an uncertain global policy environment – The World Bank
The global economy in flux. Prospects remain dim – The International Monetary Fund
The Global economy is undergoing one of the most turbulent periods in decades – World Economic Forum
The final year of the first quarter of the 21st century is a milestone and deeply emblematic of the turbulence that has marked its close. Uncertainties and apprehensions related to trade, conflict, debt, critical resources, exponential technology, jobs, and geopolitics have significantly disrupted the global economic order. Protracted wars, trust deficits, and scepticism toward multilateral and alliance structures-rooted in narrow nationalistic perspectives-have undermined the responsibilities of powerful economies toward underdeveloped countries of the Global South.
Resources for national social spending and overseas development assistance, already precarious and insufficient relative to the scale of needs, are now being reallocated to support renewed defence mobilisation. A recent example is the commitment of NATO countries to double their contributions from 2.5% to 5% of their GDP-at the expense of budgetary allocations to health, education, and social sectors, as well as their commitments to development and foreign assistance at a time of unprecedented humanitarian challenges. Tariff rationalisation by the United States has disrupted established tariff regimes and the mechanisms of the WTO and other multilateral forums. These are not standalone challenges; rather, they could and arguably do represent a new phase of the post–Second World War era.
Global economic analyses and projections for the year ahead, presented in key reports from the IMF, the World Bank, and the WEF, make serious and compelling observations about the impact of these developments on the future global economic and political order. These reports must serve as a wake-up call.
One of the most trusted assessments of the global economy is the International Monetary Fund’s World Economic Outlook. Its October edition explicitly warns that the “Global Economy is in Flux, Prospects Remain Dim.” IMF estimates for global growth in 2025 have been revised three times: the April 2025 WEO projected global growth at 2.8% – a downward revision triggered by tariff shocks. According to the report, the shifting international trade landscape will create a supply shock in tariff-imposing countries and a demand shock in tariff-targeted countries. In July, the projection was revised upward to 3%, and again to 3.2% in the October 2025 edition. The report notes that global growth, projected at 3.3% for 2024, will ease to 3.2% in 2025 and 3.1% in 2026, underscoring that 2025 has been “fluid and volatile,” with much of its dynamics driven by a reordering of policy priorities in the United States and consequent adjustments by other economies.
Although tariffs have been reset, bringing effective rates down from initial highs to 10–20% for most countries, uncertainty and shocks continue to adversely affect many economies. The WEO also highlights significant cuts in development aid and a global “restrictive stance on immigration” in the policy frameworks of numerous countries. Official Development Assistance (ODA) is estimated to have fallen by about 9% in 2024, with a similar or steeper decline expected in 2025. Low-income countries are the most affected. The combined effect of humanitarian complexity, resistance to migration, and reductions in foreign aid will likely produce two consequences: a steep decline in migrant intake by richer economies, and further worsening of the crises that force displacement in the first place.
The IMF has also introduced a new Overall Economic Policy and Trade Policy Uncertainty Index, based on media-based metrics that quantify global attention to uncertainty around trade. The World Uncertainty Index has risen from a base of 20,000 in January 2015 to 60,000 during the COVID-19 period (2019–20), and to 100,000 by August 2025. These are profoundly uncertain times for the global economy, driven by dynamics the world is ill-prepared for.
An overview of the WEO projections indicates that global output will slow from 3.2% in 2025 to 3.1% in 2026. Growth in advanced economies will remain steady at 1.6%, while growth in Emerging Markets and Developing Economies (EMDEs) will decelerate from 4.2% in 2025 to 4.0% in 2026. Within EMDEs, Emerging and Developing Asia will slow from 5.2% to 4.7%, with China declining from 4.8% to 4.2% and India from 6.6% to 6.2%. The report also projects a troubling outlook for global trade volume growth: from 3.5% in 2024 to 3.6% in 2025, before falling sharply to 2.3% in 2026, with advanced economies absorbing the biggest impact. While these are projections, outcomes will depend heavily on emerging geoeconomic and geopolitical factors – particularly a return to peace and multilateralism, which remain essential to the stability of an interdependent world.
The World Bank’s assessments across its January, June, and October 2025 reports offer a dynamic picture of shifting global conditions. Notably, Indermit Gill, Chief Economist of the World Bank, observed in his foreword to the June Global Economic Prospects report that just months earlier a “soft landing” appeared within reach as the global economy stabilised after years of natural and man-made shocks. “That moment has passed,” he warned, noting that the world economy is once again entering turbulence, and without swift correction, the impact on living standards could be profound.
The World Bank highlights that international discord – particularly around trade – has undermined long-standing policy assumptions, shaving nearly half a percentage point off global GDP by lowering early-year projections to 2.3%, marking the weakest performance in 17 years. By 2027, global GDP growth is expected to average just 2.5% for the 2020s – the slowest pace for any decade since the 1960s. Declines in per capita GDP are also expected to disproportionately affect developing economies, where levels may fall 6% below earlier projections. High-income economies, meanwhile, will likely maintain pre-COVID-19 per capita GDP levels. Developing economies have faced three consecutive decades of slowing growth – from 5.9% in the 2000s, to 5.1% in the 2010s, and to 3.7% in the 2020s – mirroring the decline in global trade.
The June World Bank report proposes three policy priorities for reversing the downward spiral and preventing a potential global recession. First, rebuilding trade relations: resolving disputes and lowering tariffs could boost global growth by 0.2 percentage points by 2026. The report stresses that developing economies—often maintaining higher tariffs than wealthier nations—should reduce tariffs across all trading partners and play a key role in restoring a fully functional, rules-based trade system through the WTO. Second, restoring fiscal order: developing economies must expand fiscal space by mobilising greater domestic resources, as they currently collect only 25% of GDP in revenue compared with 40% in high-income economies. Third, accelerating job creation: a major demographic shift is underway, particularly in South Asia, Sub-Saharan Africa, the Middle East, and North Africa, where large cohorts entering the workforce require job growth, effective labour markets, and improved education and skills development.
The report reaffirms that the global economy is at an inflection point. With decisive action, nations can still regain momentum in reducing poverty. The World Bank’s October 2025 Global Monthly Report notes that global activity continues to show resilience amid uncertainty. The consensus forecast for 2025 GDP growth has edged up slightly for both advanced economies and EMDEs. Goods trade volumes rose by 5.4% in July, up from 3.8% in June. However, this modest improvement does not indicate a V-shaped recovery—something the global economy desperately needs.
The World Economic Forum’s Chief Economists Outlook (September 2025) states that the global economy is experiencing one of its most turbulent periods in decades, with converging shocks and structural shifts reshaping the foundations of growth, trade, and governance. The “compounding shocks” from geoeconomic and geopolitical events have left deep and lasting impacts. Based on a survey conducted between July 30 and August 19, an overwhelming majority of Chief Economists concluded that the present moment reflects “resilience amid turbulence,” coupled with weakening global conditions through the coming year. About 82% expect intensifying geoeconomic fragmentation. The Middle East is expected to emerge strongest (37%), followed by South Asia (31%) and East Asia and the Pacific (30%), while Europe and the U.S. are expected to experience moderate to weak growth. For South Asia—particularly India—the newly introduced U.S. tariffs represent a major headwind.
The WEF report reiterates that geoeconomic fragmentation is accelerating, driven primarily by U.S. tariff rationalisation. Many major economies are now recalibrating global investment flows, reconfiguring supply chains, and strengthening energy security strategies. The survey further indicates that natural resources, energy, and the environment are under considerable strain, while weakened global institutions heighten vulnerabilities. Economic orthodoxy in the U.S.—particularly regarding trade and monetary policy—is being challenged, producing global ripple effects. Expectations for 2025 remain subdued, with risks skewed to the downside.
Taken together, these assessments leave little doubt that the world is more unequal today than at any point in recent history, challenging the interdependent, multilateral systems that have supported global cooperation during past crises, including the COVID-19 pandemic. Principles of shared prosperity are giving way to narrowly defined national interests. Global responsibilities—to support developing economies, advance climate goals, maintain trade and tariff stability, honour multilateral commitments, and scale down defence budgets—are increasingly neglected. A fundamental re-evaluation is needed to determine how the world can chart a more equitable and sustainable path forward despite the visible fractures in the global system.
(M. Jamshed is Distinguished Fellow with CRF and former Senior Adviser to the World Bank.)
(Cover Photo Credit: Canva)
Chief Economists OutlookEconomic PolicyEconomic slowdownGDPGlobal EconomyGlobal GDPGlobal Policy EnvironmentNATOTariffTrade Policy Uncertainty IndexTrade TariffsWorld Economic ForumWTOWTO Global Trade Outlook