Global Economy Faces Subdued Growth Amid Policy Shifts and Persistent Volatility, IMF Reports

The global economy is set for a continued slowdown, with growth projected to decelerate from 3.3% in 2024 to 3.2% in 2025 and further to 3.1% in 2026, according to the International Monetary Fund's (IMF) latest World Economic Outlook for October 2025. This outlook, released on October 26, 2025, highlights a landscape reshaped by new policy measures and persistent uncertainty.

This subdued growth trajectory is primarily attributed to a confluence of factors, including the lingering effects of new policy measures, persistent global volatility, and the fading impact of temporary stimuli that bolstered economic activity earlier in 2025. The IMF noted that while some extremes of higher tariffs were tempered, the overall environment remains volatile.

Despite a modest upward revision in the near-term forecast compared to the April 2025 World Economic Outlook, the overall prospects remain dim, as reported by vertexaisearch.cloud.google.com. The global economy is adjusting to a new landscape, with policymakers urged to restore confidence through credible and transparent actions.

Key among the new policy measures impacting the global outlook are trade-related shifts, particularly the implementation and renegotiation of tariffs. J.P. Morgan Research indicated on October 20, 2025, that ongoing trade policy could lead to a broad-based downshift in growth and a rotation in inflation pressures.

Persistent volatility, driven by geopolitical tensions and policy uncertainty, continues to weigh heavily on investment and global commerce, according to the OECD's Economic Outlook published on June 3, 2025. This environment makes long-term planning challenging for businesses and governments alike.

Moreover, temporary factors that provided a boost to activity in the first half of 2025, such as the "front-loading" of trade ahead of anticipated tariffs, are now fading. This observation was echoed by AXA IM UK on October 20, 2025, which noted that unexpected resilience against higher US tariffs reflected these transient elements.

The IMF's Managing Director, Kristalina Georgieva, stated on October 20, 2025, that while the global economy has shown resilience, the outlook is "underwhelming" with weak medium-term growth prospects. She emphasized the need for countries to rebuild fiscal spaces and reduce debt.

• Background Context and Historical Perspective: The current global economic slowdown follows a period where the world economy demonstrated unexpected resilience against various shocks, including initial tariff increases. However, this resilience was partly due to temporary factors like front-loading of imports and agile private sector responses, as highlighted by EFG International on October 17, 2025. The IMF's projections for 2025 and 2026 represent a deceleration from 2024's growth, indicating a shift towards a more challenging economic environment.,

• Key Stakeholders and Their Positions/Interests: The International Monetary Fund (IMF) is the primary reporter, providing the overarching global economic outlook and policy recommendations. Governments worldwide are grappling with the implications of new policy measures, particularly trade tariffs, and are urged by the IMF to implement credible and sustainable policies. Businesses face uncertainty due to trade tensions and volatility, impacting investment decisions, as noted by PwC Ireland on October 22, 2025.,

• Economic Implications: The projected slowdown implies reduced job creation and challenges in poverty reduction, especially in emerging market and developing economies (EMDEs), according to the World Bank's Global Economic Prospects report from June 10, 2025. Inflation is expected to continue declining globally, though with significant variations, remaining above target in the United States while being more subdued elsewhere. Fiscal vulnerabilities are also a concern, with global government debt expected to rise.,,

• Related Developments and Regional Divergences: While global growth is slowing, regional performances vary. Advanced economies are expected to grow around 1.5%, while emerging market and developing economies are projected to grow just above 4%, driven by higher investment and demographics, as reported by trendsnafrica on October 26, 2025. India, for instance, is projected by Mint on October 25, 2025, to grow at 6.6% in 2025, outpacing China's expected 4.8%.,

• Expert Opinions and Analysis: Economists describe the current phase as a "below-trend expansion," where demand and investment lag behind previous cycles, according to Morgan Stanley's analysis on October 23, 2025. McKinsey's economic conditions outlook from September 29, 2025, revealed that nearly seven in ten respondents now rank a recession scenario as most likely, with a demand-led recession being the largest concern.,

• Potential Future Developments and Next Steps: Policymakers are encouraged to rebuild fiscal buffers, preserve central bank independence, and redouble efforts on structural reforms to foster long-term growth and stability. Resolving policy uncertainty and achieving clearer trade agreements could significantly boost the global economy, potentially raising global output by 0.4% in the near term, as suggested by the IMF on October 14, 2025.,

• Impact on Different Groups or Communities: The slowdown will particularly affect low-income countries and those reliant on global trade, limiting their ability to boost job creation and reduce extreme poverty, as emphasized by the World Bank on June 10, 2025. Households in some regions, like Thailand, are facing fragile private consumption and decreasing income, partly due to the impact of US tariff measures, according to SCB EIC on October 26, 2025.,

• Regulatory or Legal Context: The shift towards protectionist trade policies and the imposition of tariffs have created a complex regulatory environment. The IMF's October 2025 report notes that the global economy is adjusting to a landscape reshaped by new policy measures, with some extremes of higher tariffs being tempered by subsequent deals and resets. This ongoing trade diplomacy is a critical aspect of the current economic climate.