Since 2020, the International Monetary Fund’s World Economic Outlook has offered a comprehensive narrative of an increasingly volatile and fragmented global economy. Over the past five years, global economic activity has been disrupted by the Covid-19 pandemic, waves of unprecedented fiscal and monetary interventions, major geopolitical events, and an evolving landscape of trade and technology disputes. The tone of the April 2020 report was marked by urgency and extraordinary uncertainty, as the world entered an abrupt and synchronised economic collapse. Global GDP contracted by 3.1 percent in 2020, the sharpest downturn since the Great Depression. In response, both advanced and emerging economies adopted sweeping policy packages to cushion the fallout, supporting markets, employment, and financial systems.
As restrictions eased and vaccine distribution accelerated in 2021, a strong recovery took hold, led by large-scale fiscal support, pent-up demand, and robust investment in key economies, notably the United States and China. Global output rebounded sharply, growing by 6.3 percent in 2021. However, the recovery was uneven. Lingering supply chain bottlenecks, rising inflationary pressures, labour market imbalances, and stark divergences between advanced and low-income economies underlined the fragile nature of the rebound. As the IMF emphasised, while top-line growth figures were improving, underlying imbalances were deepening, especially in emerging markets where vaccine access and fiscal space remained limited.
By 2022, the tone of the World Economic Outlook had shifted to one of caution and recalibration. As inflation surged to multi-decade highs in many advanced economies, central banks moved decisively to tighten monetary policy. The U.S. Federal Reserve and the European Central Bank led the global tightening cycle, marking a sharp departure from the accommodative stance that had prevailed since the onset of the pandemic. Meanwhile, the outbreak of war in Ukraine in early 2022 introduced a new layer of global instability, sending shockwaves through energy and commodity markets. Europe was hit particularly hard, while developing economies faced the added burden of higher borrowing costs and currency depreciation. Against this turbulent backdrop, the IMF revised its growth projections downward. Global GDP growth moderated to 3.5 percent in 2022 and further slowed to 3.2 percent in 2023, with the outlook clouded by persistent downside risks.
Trade tensions, which had already escalated during the Trump administration, re-emerged as a central theme in the Fund’s assessments. The U.S.-China tariff war – triggered in 2018 and expanded through 2019 – represented a turning point in global trade policy. Tariffs were imposed on hundreds of billions of dollars’ worth of goods, reversing decades of trade liberalisation and triggering retaliatory measures. The pandemic accelerated the trend toward supply chain diversification and reshoring, as governments and firms sought to reduce strategic dependencies. By 2024-2025, additional measures – including increased tariffs, export controls on critical technologies, as well as increasingly interventionist industrial policies mainly in the U.S., but also in China, and Europe – had entrenched a more fragmented global trading environment. The IMF flagged this “geo-economic fragmentation” as a structural headwind to medium-term trade growth.
Still, the global economy has managed to maintain a modest growth trajectory, albeit below historical averages. The first quarter of 2025 surprised to the upside, with global output growing 0.3 percentage point faster than projected in the IMF’s April report. For 2025, global growth is now projected at 3.0 percent, edging slightly higher to 3.1 percent in 2026. While these figures are above the April reference forecasts, they remain well below the pre-pandemic average of 3.7 percent and suggest a softer medium-term outlook, particularly as front-loaded trade activity in anticipation of further protectionist measures may fade by late 2025. World trade volume has been revised upward by 0.9 percentage point for 2025 but downward by 0.6 percentage point for 2026, reflecting the temporary boost from front-loaded shipments and elevated trade policy uncertainty. The IMF notes that this effect will likely unwind in the latter half of 2025, leading to softer trade momentum into 2026.
Advanced economies are expected to grow by 1.5 and 1.6 percent in 2025 and 2026 respectively. The U.S. are forecast to expand by 1.9 percent in 2025 and by 2.0 percent in 2026. These projections reflect a combination of lower effective tariffs, improved financial conditions, and a slowdown in private demand and immigration. In the euro area, growth is set to accelerate modestly to 1.0 percent in 2025 and 1.2 percent in 2026, with the 2025 figure partly inflated by a sharp increase in pharmaceutical exports from Ireland to the U.S. Among other advanced economies, growth is expected to decelerate to 1.6 percent in 2025 before recovering to 2.1 percent in 2026. Emerging markets and developing economies are projected to grow by 4.1 percent in 2025 and 4.0 percent in 2026. China’s 2025 growth forecast has been revised up to 4.8 percent, following stronger-than-anticipated H1 activity and a substantial reduction in U.S.-China tariffs. India is forecast to maintain a robust trajectory, with GDP growth of 6.4 percent in both 2025 and 2026. Elsewhere, growth is seen improving across the Middle East and Central Asia. Latin America and the Caribbean are projected to slow before recovering slightly in 2026. Meanwhile, growth in emerging Europe is expected to remain subdued over the same period.
For dry bulk markets, the thirty-first trading week offered little in the way of clear direction. The spot market appeared to pause – not necessarily to absorb the IMF’s updated outlook, but more directly in response to signals out of China. The much-anticipated July Politburo meeting, which was expected to set the economic tone for H2 2025, failed to deliver any major new stimulus for the beleaguered property sector. This lack of policy momentum weighed on sentiment across commodity markets. As a result, the Baltic Dry Index slipped for the second consecutive week, closing at 2,018 points – down roughly 10 percent week-on-week. The Capesize segment bore the brunt of the decline. Looking ahead, while the IMF’s slightly more optimistic revisions may offer some macro-level encouragement, the dry bulk market continues to trade on near-term fundamentals, with Chinese policy direction and seasonal demand patterns playing a far greater role in shaping the immediate outlook.
Data source: Doric