A grim long-term forecast has been issued for the global economy, with a leading financial body warning of a “dim” outlook despite current resilience. The report identifies the delayed impact of trade tariffs and the economic drag from restrictive immigration as major headwinds that threaten to slow future growth.
For now, the world economy appears robust, with the 2025 growth forecast upgraded to 3.2%. However, the analysis dismisses this as a temporary phase, arguing it was artificially inflated by households and businesses bringing forward purchases to beat the introduction of tariffs. The true, negative effect on investment is expected to emerge over time.
A significant portion of the report is dedicated to the economic consequences of tightening borders. It specifically warns the United States that its crackdown on immigration could shrink its economy by up to 0.7% and trigger inflationary pressures in sectors like construction and agriculture due to labor shortages.
The United Kingdom’s forecast is a mixed picture of modest growth and high inflation. A small upgrade to 1.3% growth for the year is contrasted with a projection that the UK will have the highest inflation rate among its G7 peers in 2025 and 2026, creating a difficult environment for the Bank of England.
The report also flags concerns about “stretched valuations” in financial markets. A potential “correction,” especially if the current excitement around AI technology fades, could lead to a sharp decline in investment, adding another significant headwind to the already challenging global outlook.