A “Dim” Future Beckons: Global Economy’s Resilience Seen as Short-Lived

Despite the global economy showing “unexpected resilience” this year, a leading financial institution is forecasting a “dim” future, arguing that the current stability is short-lived. The world’s 2025 growth forecast has been revised up to 3.2%, but the report is laden with warnings about what lies ahead.
The core argument is that the world has not yet faced the full consequences of the recent shift towards protectionism. The report suggests that the initial impact of US tariffs was cushioned by a temporary surge in consumer spending. The real damage to business confidence and long-term investment is still expected to materialize, leading to a weaker growth trajectory.
The United Kingdom’s economy is presented as a case study in this fragile outlook. While its growth has been upgraded to 1.3% for this year, it is also on course for the highest inflation rate in the G7. This highlights the difficult trade-offs facing policymakers in an environment of persistent price pressures.
The report also identifies new and growing risks to global stability. It warns that restrictive immigration policies could act as a significant drag on economic growth, with the US potentially seeing a GDP reduction of up to 0.7%. Furthermore, it points to “stretched valuations” in the stock market as a potential trigger for a sharp, investment-led downturn.
The message from the report is one of sober realism. The better-than-expected performance in 2025 is welcome news, but it should not be misinterpreted as a sign that the global economy has overcome its fundamental challenges. The path forward is likely to be difficult and uncertain.