UN Press Conference: World Economic Situation and Prospects Mid-Year Update

Global Economic Outlook Downgraded

• 📉 The global economy is experiencing a nervous time with diminished growth prospects and significant volatility, leading to a downward revision of global economic growth forecasts to 2.4% for 2025 and 2.5% for 2026.
• ⚠️ This slowdown is affecting most countries and regions, with the least developed countries (LDCs) being severely hit, experiencing a drop in growth prospects and a significant loss in economic output.
• 🌍 LDCs face compounding challenges including falling ODA, limited fiscal space, high debt, and persistent inflation, with their cumulative growth since 2021 expected to be over a quarter smaller than pre-pandemic averages.

Trade Policy Uncertainty and Tariffs

• 📈 Trade policy uncertainty has surged to its highest value in 10 years, significantly impacting economic indicators and business confidence.
• 🇺🇸 The average effective tariff rate in the US has increased substantially, about six times higher than at the start of the year, impacting prices and slowing lending and spending.
• 🌐 Merchandise trade, representing over a fifth of world output, is affected, with US and China accounting for a significant portion of imports, causing reverberations across the global economy.
• 💡 Difficulty in accessing capital due to uncertainty can be fatal for small and medium enterprises, often impacting women disproportionately.

Public Finance and Fiscal Challenges

• 📊 Fiscal deficits are increasing globally for various reasons, posing significant challenges for developing countries that cannot finance them as affordably as developed economies.
• 💰 Developing countries face a challenging fiscal situation, with median interest payments as a share of public revenue expected to rise, exacerbating debt challenges amidst slower growth and diminished trade.

Looking Ahead and Policy Implications

• ✨ Despite downgrades, the global economy was reasonably healthy at the start of the year, and the current situation is not as extreme as the global financial crisis.
• 🤝 Bilateral negotiations are expected to lead to lower tariff levels, though not back to pre-February levels, and an early resolution of uncertainties would aid economic decision-making.
• 🌍 The transition period may bring opportunities for countries that invest appropriately, fostering deeper regional trade networks and diversified economies for increased resilience.
• ⚠️ Monetary policy decisions will be complex due to high economic and trade policy uncertainty, with potential global spillovers affecting financial markets and constraining policy space for developing countries.
• 🌐 There is an urgent need for a renewed global framework for financing development, with a focus on inclusive and environmentally sustainable growth.