A trio of threats—lingering tariff impacts, restrictive immigration policies, and a potential AI bubble—are clouding an already “dim” global economic outlook, a new report has warned. Despite an upgrade to this year’s growth forecast to 3.2%, the institution highlights this dangerous combination as a key reason for its long-term pessimism.
First, the report argues that the full, negative effect of US-led tariffs on business investment has been postponed, not avoided. This lingering threat is expected to weigh on growth in the coming years.
Second, the analysis singles out the economic self-harm of restrictive immigration policies. It provides a stark forecast for the US, suggesting its crackdown could reduce its GDP by up to 0.7% and fuel sector-specific inflation, creating a drag on the entire global economy.
Third, the report sounds the alarm on “stretched valuations” in financial markets, driven by hype around generative AI. It cautions that a market “correction” is a distinct possibility, which could trigger a “sharp” fall in investment and derail recent economic gains.
This trio of threats presents a formidable challenge for policymakers. The UK, for example, must navigate this environment while also dealing with its own domestic problem of the G7’s highest inflation rate. The report is a clear signal that while the immediate economic picture has improved, the horizon is filled with significant and complex dangers.
