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ARTHA

Global Economic Prospects

Improve Modestly,

But Road to Sustained Recovery

remains Strenuous

I In the last few years, the world has witnessed For 2026, the world economy is estimated to grow at 3.1
several economic shocks including the Covid-19
per cent, the same as that projected in the July update
pandemic, supply chain disruptions,
post-pandemic surge in prices, geopolitical wars, and and slightly up from 3.0 per cent projected in April.
most recently, imposition of tariff and non-tariff trade
barriers by the US. The succession of these Trade policy is rapidly evolving, but world
disruptions has severely tested resilience of global trade order seen to withstand shocks
economy and weighed down global growth, which is
expected to remain below the 2007-2019 average of
3.4 per cent in the coming two years, as projected in The upward revision for 2025 reflects the combined effect
the International Monetary Fund (IMF)’s World of various factors that have helped reduce the severity of
Economic Outlook (WEO) 2025. tariff-induced impact on output. These include trade deals
between the US and several partner nations that have
However, the global economic outlook for 2025 and lowered effective tariff rates from the highs of April,
sector-specific tariff exemptions, front-loading of imports
2026 has improved modestly compared to that in and supply chain diversification. More importantly, from
April 2025 (when the new tariff policy of the US was the perspective of maintaining relative stability in the
first announced), as well as in July. The latest update existing world trade order, this potentially signals a move
to IMF WEO in October 2025 has revised global towards a stabilization of trade, albeit with new normal of
growth projection for 2025 to 3.2 per cent from 3.0 high tariff, instead of further escalation of trade tensions
per cent projected in July and 2.8 per cent in April.
and uncertainty.

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