With interest rates declining and nearing their floor in many countries and regions, the global economic cycle should accelerate growth going forward. However, as we have anticipated, forecasts point to only a mild hastening over the next two to three years and at a different pace by region. Common factors — such as uncertainty surrounding the global geopolitical situation and worsening fiscal imbalances — are acting as headwinds to growth. These come on top of the structural trends already noted, including population ageing globally and China’s economic slowdown.
On the other hand, certain factors could push growth above current projections. For instance, a faster-than-expected de-escalation of ongoing armed conflicts, coupled with strengthened global coordination and multilateralism, would provide upside momentum. Similarly, a more rapid and widespread adoption of AI than currently anticipated would boost productivity and economic growth. According to the IMF, a marked decline in global economic policy uncertainty — stemming from clearer and more stable bilateral and multilateral trade agreements — could raise global output by around 0.4%. Reducing tariffs within these agreements would add roughly another 0.3% to growth. In addition productivity gains from artificial intelligence could further increase global output by about 0.4% in the near term.
