Global economic outlook upgraded: can it break through the 'fog' of downward risks?

Recently, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) both raised their growth forecasts for the global economy and certain economies. This move is like casting a beam of hope onto the cloudy sky of the global economy. However, the downside risks simultaneously warned by the two institutions—including tariff shocks, trade policy uncertainty, rising protectionism, geopolitical tensions, and fiscal vulnerabilities—cast a heavy shadow over this optimistic outlook.

The IMF and OECD did not raise their forecasts without reason. From a short-term perspective, importers stockpiled goods in advance to avoid U.S. tariffs, leading to a temporary surge in trade volumes; the proactive efforts of many countries to maintain an open and stable global trading system have also offset, to some extent, the negative impact of trade protectionism. Taking Asia as an example, as a core driver of the global supply chain, it contributed a major share of global trade growth in the first half of 2025, with South-South trade growing at 8%, surpassing the global average and becoming an important engine of growth.

However, behind this growth, structural contradictions and systemic risks are accumulating. The long-term impact of tariff shocks has yet to become apparent. The IMF warns that if the U.S. continues to increase tariffs and triggers a global trade war, global economic growth could be reduced by 0.3 percentage points in 2026. Trade policy uncertainty has already led to a decline in business investment intentions. OECD data show that the total value of imported goods subject to U.S. tariffs has declined noticeably compared to non-tariffed goods, and the pressure on trade volumes directly drags down manufacturing investment and employment growth. Even more serious, the combination of trade protectionism and geopolitical tensions is accelerating the restructuring of global supply chains, forcing companies to seek a balance between efficiency and security. This could permanently alter the global trade landscape, resulting in efficiency losses.

Fiscal vulnerability is another 'time bomb.' The ratio of U.S. public debt to GDP is expected to rise from 122% in 2024 to 143% in 2030, and among low-income countries, 35 are already facing or at risk of high debt distress. When debt burdens combine with external shocks such as climate disasters and volatility in commodity prices, they may trigger a 'vulnerability trap'—forcing governments to use fiscal resources for post-disaster reconstruction, crowding out public investment, and further weakening long-term growth potential. A UN Conference on Trade and Development report points out that developing countries grow faster due to climate-related extreme events, and shocks to food prices and supply chains have become systemic risks.

In the face of these challenges, global policy coordination and structural reforms are urgent. Reforming the international financial architecture is a key part; reducing overreliance on U.S. dollar financing channels and enhancing developing countries' access to funds can mitigate the impact of exchange rate fluctuations and financing costs on trade. The trade system needs to evolve toward being rules-based, multilateral, and non-discriminatory, maintaining the core position of the World Trade Organization and preventing fragmentation of trade policies. Regional cooperation platforms such as the G20 and BRICS should strengthen coordination and use multilateral mechanisms to reduce policy uncertainty.

At the national level, developed economies need to balance fiscal consolidation with economic growth, avoiding premature tightening that could stifle recovery; emerging markets need to enhance resilience through structural reforms, such as promoting labor mobility, investing in digitalization, and strengthening institutional capacity. Industrial policy should avoid a 'flood irrigation' approach, fully evaluating opportunity costs, and focus on key areas like green transition and artificial intelligence.

The global economy stands at a crossroads, with short-term growth and long-term risks coexisting. Only through policy coordination and structural reforms can rising expectations be translated into sustainable growth momentum and prevent 'fragile resilience' from evolving into a systemic crisis.