The International Monetary Fund (IMF) published its October 2025 World Economic Outlook (WEO) on Tuesday, during the 2025 Annual Meetings of the IMF and the World Bank Group (WBG) held in Washington between Oct. 13-18.
The global economy has withstood the shock of tariffs thanks to temporary factors that are now fading – exposing it to the risks posed by decreasing consumption and investment, dangerous protests, and an AI bubble that may one day burst.
IMF Chief Economist Pierre-Olivier Gourinchas said that the global economy’s outlook remains 0.2 percentage points below forecasts made at the October 2024 IMF projections, calling the medium-term prospects “dim.”
Global output is projected to expand by 3.2 percent in 2025, down from 3.3 percent in 2024, and to ease even further to 3.1 percent in 2026.
The IMF largely attributes the global economy’s previous resilience to temporary factors – front-loaded trade, investment, and inventory strategies – that are now fading.
“As these factors fade, weaker data are surfacing,” Gourinchas said at a briefing.
Labor markets are softening, while tariff pass-through to US consumer prices, previously muted, is now increasingly likely.
The IMF is seeing a potential bubble in the rapid rise of AI stocks, similar to the “dotcom bubble” that burst in 1990.
The IMF cautioned that an abrupt repricing of tech stocks could follow if AI-related productivity or earnings disappoint, marking a potential end to the AI investment boom and carrying “broader implications for macro-financial stability.”
Asked by the Kyiv Post how the IMF assesses geopolitical threats, Gourinchas said that the Fund closely monitors conflicts in the Middle East, as well as Russia’s full-scale invasion of Ukraine.
The primary impact of such geopolitical threats may be on energy or oil prices once again.
Gourinchas added that the IMF’s risk models now account for shocks to energy prices, trade, and labor migration, stressing that transmission mechanisms have become more complex.
“There isn’t a single answer,” he said. “You have to think about energy markets, trade spill-overs, and even labor mobility to assess the full impact.”
“We already have geopolitical risks with us, and the question is where they might manifest themselves,” he explained. “If they lead to disruption in energy markets in particular, that could have an adverse effect on the global economy.”
Beyond market risks, the Fund highlighted structural pressures: weaker immigration inflows leading to a reduced labor market, widening fiscal vulnerabilities, and political interference threatening the independence of economic institutions. Climate-related commodity price spikes and financial fragilities could amplify downside risks.
Still, the IMF said breakthroughs in trade negotiations or faster productivity growth from AI could lift the outlook. To rebuild confidence, it urged rules-based trade policy road maps, fiscal consolidation through “realistic, balanced plans,” and stronger monetary policy credibility.
Potential risks
- Policy uncertainty – prolonged uncertainty could weaken consumption and investment.
- Protectionism – further escalation of tariffs and nontariff barriers may suppress investment, disrupt supply chains, and stifle productivity growth.
- Labor supply shocks – restrictive immigration policies could reduce growth, especially in economies with aging populations and skill shortages.
- Fiscal vulnerabilities – high debt levels and fragile fiscal positions could interact with rising borrowing costs and create rollover risks for sovereigns.
- Financial market fragilities – elevated risks in markets could amplify shocks as interest rates remain high.
- Tech-stock correction – an abrupt repricing of technology equities, triggered by weaker AI-related earnings or productivity gains, could end the AI boom and spill over into global financial stability.
- Institutional pressures – political interference or reduced independence of key economic institutions, such as central banks, could erode policy credibility and undermine decision-making.
- Commodity-price spikes – shocks from climate events or geopolitical tensions could drive up energy and food prices, particularly harming low-income, commodity-importing countries.
Potential positives
- Breakthrough in trade negotiations – could lower tariffs and reduce uncertainty across global markets.
- Renewed reform momentum – structural reforms aimed at addressing current challenges could boost medium-term growth.
- Faster productivity growth from AI – broader adoption of artificial intelligence could deliver economy-wide efficiency and output gains.