Global Macroeconomic Outlook Q4 2025: Leveraging Policy-Driven Demand, Easing Inflation, and Rising Merchandise Trade

Himasha Dissanayake, JadeTimes Staff

H. Dissanayake is a Jadetimes news reporter covering Economic

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Source: Brookings Institution

The global macroeconomic outlook for 2025 has improved, with the Q4 update lifting the growth forecast to 2.62%, an increase of 0.20 percentage points from the previous quarter. The upward revision reflects short-term momentum from policy-driven spending, easing inflationary pressures, and partial tariff rollbacks that softened earlier trade shocks. Regional upgrades were broad-based, with the Americas rising by 0.27 points, Asia Pacific by 0.20, Europe by 0.12, and the Middle East and Africa (MEA) by 0.06 percentage points.

Inflation is expected to moderate globally, falling to 5.33% in 2025 from 5.78% in 2024, signaling improving price stability in most regions. Europe is projected to ease to 3.81%, MEA to 14.47% (down sharply from 20.10%), and APAC to 4.22%. The Americas stand out as an exception, where inflation is expected to edge up to 4.43%, partly due to cost pressures linked to protectionist trade measures.

Monetary policy shifts continue to shape global conditions. The US Federal Reserve has reduced rates by a total of 75 basis points, while the European Central Bank cut rates eight times since June 2024, bringing its benchmark to 2.15%. Major economies also loosened policy: India lowered rates by 100 basis points, China by 10, Canada and Australia by 75 each, South Korea by 50, and Russia by a steep 450 basis points, signaling mixed responses to inflation and growth risks.

Supply chain pressures re-emerged in mid-2025, reflected in the New York Fed’s index averaging 0.04 from April to September, compared to -0.21 in late 2024 to early 2025. New protectionist tariffs under the Trump administration have elevated input costs and weakened trade ties, hitting construction and automotive sectors particularly hard through disrupted supplies and slower order flows.

Trade expectations nonetheless improved for 2025, with the WTO upgrading merchandise trade growth to 2.4% from a negative forecast earlier. The rebound is supported by frontloaded imports in North America, ongoing fiscal support, receding inflation, and rising demand for AI-related goods. However, the WTO revised 2026’s forecast down to 0.5%, signaling caution as tariff risks, weaker developed market demand, and fading frontloading effects weigh on future prospects.

As governments continue balancing policy stimulus and inflation control, the coming year presents a complex but improving global economic landscape — with short-term gains offering momentum amid long-term uncertainties.