Why the global economy is still hanging on — and what it means for the EU, USA & emerging markets

IMF’s latest forecast offers cautious optimism amid trade tensions and high debt levels.

The global economy may not be booming — but it’s still breathing. According to the latest IMF World Economic Outlook (October 2025), global real GDP is expected to grow by 3.2 % this year and 3.1 % in 2026. That’s a modest but notable improvement over earlier forecasts, signaling resilience in the face of persistent trade tensions, elevated debt, and geopolitical uncertainty.

Yet the Fund cautions that this strength may prove fragile. Inflation remains sticky in advanced economies, productivity growth is weak, and the benefits of technology investment are unevenly distributed. The outlook, in short, is better — but still dim.

1. A modest upgrade from the IMF

The IMF’s October 2025 report paints a nuanced picture:

• Global growth: 3.2 % in 2025 (up 0.1 points from April forecast)
• Advanced economies: 1.6 %
• Emerging markets: 4.5 %

The world’s largest economies are diverging. The United States continues to outperform expectations thanks to robust tech-sector investment and consumer spending, while the Eurozone remains weighed down by sluggish productivity and industrial output. Meanwhile, India und China still account for more than half of global growth.

2. Why growth is holding up better than feared

Despite the drag from tariffs and monetary tightening, three factors are cushioning the global slowdown:

1. AI-driven investment in the U.S.
   Capital spending on artificial-intelligence infrastructure has surged, offsetting the negative effects of trade barriers. According to Business Insider, U.S. tech firms have poured billions into data centers and automation in 2025, keeping growth near 2 %.
2. Resilient Asian demand
   Domestic consumption across India and Southeast Asia remains robust, supported by demographic tailwinds and rising wages.
3. Stabilized supply chains
   After years of pandemic-related disruptions, global logistics costs have normalized, allowing trade volumes to recover — even if tariffs remain a concern.

3. Why the “dim” outlook remains

Even with short-term resilience, the IMF warns that structural challenges are deepening:

• Demographic headwinds: Ageing populations in Europe and East Asia are shrinking labor pools.
• Debt burdens: Global public debt remains above 90 % of GDP, raising fiscal-sustainability concerns.
• Low productivity: Technology is transforming some industries but leaving many others stagnant.
• Geopolitical uncertainty: Continued tariff escalations and regional conflicts risk fragmenting trade flows.

As a result, medium-term growth potential has slipped below the pre-pandemic average of 3.8 %.

4. Regional breakdown

🇺🇸 United States

Growth in 2025 is projected around 2.0 %, driven by AI-related capital spending und solid consumer demand. Inflation is easing but remains above the Federal Reserve’s 2 % target.
Read more regional analysis on Eurosalesman US

🇪🇺 European Union

The Eurozone economy continues to expand slowly, near 1.2 %, amid tight financial conditions and weak manufacturing. The European Central Bank (ECB) has paused rate hikes, but structural reforms remain key to boosting productivity.
Explore EU market insights on Eurosalesman EU

🇨🇳 China

China’s growth has cooled to 4.8 %, its slowest pace in a year, as the property sector contracts and exports weaken. Policymakers are shifting focus toward domestic consumption to stabilize momentum.

🇮🇳 India

India remains the standout performer among major economies, with growth above 6.5 %. Strong consumer demand and digital-sector expansion continue to support resilience despite global headwinds.
Visit Eurosalesman India

🇯🇵 Japan

After years of ultra-loose monetary policy, Japan faces a balancing act: maintaining growth near 1 % while addressing yen volatility and a possible policy pivot from the Bank of Japan.

5. What this means for business and policy

For investors and policymakers, the message is clear: the global economy is entering a “slow but steady” phase. While the next recession isn’t imminent, the window for structural reform is narrowing.

• Businesses should diversify supply chains and prepare for sustained moderate growth.
• Governments must strengthen fiscal buffers as interest payments rise.
• Investors can focus on regions showing real-economy momentum — especially India and the United States.

🔍 Key Takeaway

The global economy is proving more resilient than pessimists predicted — but the gains are fragile. 2025’s growth story is one of adaptation rather than acceleration: technology investment, regional demand, and stable policy coordination are keeping the system afloat.

For now, the world’s economic engine is still running — just not at full speed.