In its Global Macro Outlook 2025-26 (May update), Moody’s said geopolitical stresses, like tension between India and Pakistan, also have a potential downside risk to its baseline growth forecasts. Costs to investors and businesses are likely to rise as they factor in new geopolitical configurations when deciding where to invest, expand, and/or source goods, Moody’s said.
“Economic growth was already set to slow this year back to its potential rate. We lowered our global growth projections for 2025 and 2026 further on account of the policy shifts and more intense policy uncertainty than we had previously expected, especially in the largest two economies, the US and China,” Moody’s said.
Stating that policy uncertainty is further slowing growth in 2025, Moody’s said it is likely to take a toll on consumer, business, and financial activity. Despite a pause and reduction in some tariffs, policy uncertainty and trade tensions, especially between the US and China, are likely to dampen global trade and investment with consequences across the G-20.
For China, Moody’s expects growth to be 3.8 per cent in 2025 and 3.9 per cent in 2026, lower than 5 per cent in 2024.
“In April, financial market metrics reflected uncertainty-induced risk aversion and repricing of some financial assets. Frequent bouts of intense financial market volatility that tighten liquidity and significantly raise the cost of capital could erode economic resilience, posing risks to growth,” Moody’s added.
