Despite an upgraded forecast for global growth this year to 3.2%, the world economy remains on edge, with a major new report failing to dispel fears of a “dim” future. The institution behind the report warns that the current “unexpected resilience” is a temporary state of affairs, with significant risks gathering on the horizon.
The central fear is that the economic pain from the recent surge in protectionism has been postponed, not prevented. The report argues that the initial impact was masked by a wave of pre-emptive consumer spending. The real damage to long-term business investment is expected to become apparent over the next year, leading to a weaker growth trajectory.
The United Kingdom’s forecast is a case in point. Its growth has been revised up to 1.3% for the year, a seemingly positive development. However, this is overshadowed by a projection that the UK will have the highest inflation rate in the G7 in 2025 and 2026, a sign of deep-seated economic challenges.
The report also details other factors keeping the world on edge. It warns that restrictive immigration policies pose a direct threat to economic output and could fuel inflation. Furthermore, it highlights the risk of a “correction” in “stretched” stock markets, where a sudden loss of confidence in the AI sector could trigger a sharp investment downturn.
The overarching message is that the global economy is in a precarious position. The headline growth number for 2025 has improved, but the underlying narrative is one of mounting risks and profound uncertainty about the path ahead.