A leading global economic authority has upgraded its forecast for world GDP growth this year to 3.2%, citing “unexpected resilience” in the face of major headwinds like US tariffs. However, the positive revision comes with a heavy dose of caution, as the report’s authors describe the long-term outlook as “dim.”
The central argument is that the economic pain from protectionist trade policies has been postponed, not prevented. The report points out that many businesses and consumers reacted to the announcement of tariffs by accelerating their purchases, creating a temporary surge in activity that has masked the underlying damage to investment confidence. The Brexit aftermath is presented as a case study in how such impacts can take years to fully materialize.
This precarious global situation is reflected in the forecast for the United Kingdom. While its 2025 growth forecast has been edged up to 1.3%, the nation is grappling with a severe inflation problem. Projections show the UK will have the highest inflation rate among G7 peers in 2025 and 2026, creating a tough environment for policymakers.
The report also casts a wary eye on two other key areas. First, it warns that restrictive immigration policies, such as those being pursued in the US, pose a direct threat to economic output and could fuel inflation in specific sectors. Second, it highlights the risk of a “correction” in “stretched” stock markets, where a fall in AI-hyped share prices could trigger a sharp drop in investment.
In light of these numerous downside risks—from trade and immigration to financial market instability—the report advises central banks to tread carefully. The recommendation for the Bank of England, for instance, is to be “very cautious in its easing trajectory,” signaling that interest rate cuts should not be rushed while the economic future remains so uncertain.