Global Growth

The World Economic Outlook, October 2025, published by the International Monetary Fund (IMF), provides interesting insights into the trends in the growth of the global economy. On the positive side, the report expects that the slowdown in the global economy, after the import tariff hikes in the United States (US), will be rather modest and may not be as significant as anticipated. Hence, they forecast that global growth will only slowly decelerate from 3.3% in 2024 to 3.2% in 2025 and further to 3.1% in 2026. This will mean five consecutive years of slower growth after the global economy bounced back to a peak of 6.6% in 2021, immediately after the pandemic. A simple calculation shows that long-term global growth will hence decelerate to 3.1% in the 10 years between 2017 and 2026, a bit slower than the 3.4% growth clocked in the previous 10 years between 2007 and 2016. This is understandable given the sharp deceleration or decline in growth across the major economies during the pandemic and the increasing hurdles to the growth of global trade across the nations. But it is just not the slowdown which is worrying. What makes this deceleration in growth more alarming is that it is the emerging market and developing economies (EMDEs) that have been worst hit. This is in sharp contrast to the growth in the advanced economies, where it has even accelerated. In fact, the gap between annual average growth rates in EMDEs and advanced economies will almost halve to around 2% in the current decade. Such opposing trends in the advanced economies and EMDEs imply that any chances of the EMDEs ever catching up with advanced economies will further recede now. This is rather alarming as the growth prospects of EMDEs are fraying as new trade barriers and geopolitical uncertainties weigh down on the prospects of international trade. Decadal figures show that average annual growth in the advanced economies will pick up by almost half, with the numbers accelerating from 1.3% in the 2007–16 period to 1.9% in the 2017–26 period. Among advanced economies, the largest gains are by the European Union (EU) and the US. While annual average growth in the EU will almost double from 0.9% during 2007–16 to 1.6% in 2017–26, that of the US will move up from 1.5% to 2.3%. Growth will, however, be lackadaisical in Japan, with the numbers stagnating at 0.4% across the decades. But unlike in the advanced economies, which register a marginal acceleration, the overall growth in the EMDEs is expected to slow down from 5.3% in 2007–16 to 4% in 2017–26. The slowdown is the worst in emerging and developing Asia, with growth sharply decelerating from 7.6% to 5.2%, that is, by around 2.4 percentage points. In emerging Asia, China is to register one of the sharpest falls, with the annual average growth rate dipping from 9% in 2007–16 to 5.3% in 2017–26, that is, by 3.7 percentage points. The decadal dip is milder in India’s case, with the numbers only going down from 6.8% to 5.7%, a decline of 1.1 percentage points. Growth is expected to pick up from 6.5% in 2024 to 6.6% in 2025 and then dip to 6.2% in 2026, the slowest since the pandemic. The deceleration of growth in EMDEs in Latin America, the Middle East and Central Asia and in sub-Saharan Africa will be more benign. Among EMDEs, only emerging and developing Europe will be able to marginally sustain the growth momentum. A positive impact of the global slowdown is the sharp d-eceleration in consumer prices. While consumer prices in advanced economies are forecast to slow down from 2.6% in 2024 to 2.5% in 2025 and further to 2.2% in 2026 (that is, by 0.4 percentage points), those in the EMDEs will decline from 5.3% to 4.7% to 3.9% (by 1.4 percentage points). A surprising forecast made in the report is that consumer prices in the US will also mirror the global trends, with the numbers decelerating from 3% in 2024 to 2.7% in 2025 and further to 2.4% in 2026. This is rather surprising as it indicates that the tariff hikes on imports into the country will have almost no impact on consumer prices. However, growth is also forecast to slow down from 2.1% in 2024 to 1.8% each in 2025 and 2026. Prices in the EU will also decelerate from 2.6% to 2.4% to 2.2% over the period. Among EMDEs, consumer prices in emerging Asia will de-celerate from 1.9% in 2024 to 1.3% in 2025 and then pick up to 2.1% in 2026. Though consumer prices will continue to decelerate in Latin America and the Caribbean, emerging and developing Europe, the Middle East and Central Asia, and sub-Saharan Africa, they are still forecast to remain high in the 5% to 10% range in 2026. Another positive aspect highlighted in the IMF report is the marginal increase in the volume of global trade in goods and services, despite the growing restrictions on imports and migration. The growth of global trade volumes is expected to pick up marginally from 3.5% in 2024 to 3.6% in 2025 and then decelerate to 2.3% in 2026. Similarly, the global trade prices will also marginally pick up during these years. However, while the volume of exports of goods and services from advanced economies will pick up from 1.8% in 2024 to 2.1% in 2025, that from EMDEs will slow down from 6.5% to 5.9% during this period. To add to the woes, exports of goods and services will slow down in both jurisdictions in 2026.