Beyond the Numbers: The Psychology of a “Dim” Economic Outlook

A new global economic report looks beyond the headline numbers to explore the psychology of a “dim” outlook, suggesting that shifting expectations could be a major drag on future growth. While the 2025 global growth forecast has been upgraded to 3.2%, the institution warns that waning confidence among businesses and households poses a significant threat.
This psychological element is most evident in the analysis of the UK economy. The report’s chief economist highlighted that British “households and firms are becoming maybe a bit less certain that inflation is coming down quickly.” This loss of faith can become a self-fulfilling prophecy, making it harder to control prices and leading to the forecast of the G7’s highest inflation rate.
On a global scale, the report argues that the “unexpected resilience” to trade tariffs is temporary. The real damage will come later, as businesses delay long-term investment decisions due to policy uncertainty. This erosion of confidence, rather than the immediate financial cost of tariffs, is presented as the primary long-term threat.
The report also touches on the psychology of financial markets. The warning about “stretched valuations” in the AI sector is essentially a caution against irrational exuberance. It suggests that if market sentiment turns, the psychological shift from optimism to pessimism could trigger a very real and “sharp” decline in investment.
The core message is that economics is not just about numbers; it’s also about confidence and expectations. While the current data may show resilience, the report suggests that the psychological foundation of the global economy is weakening, pointing towards a more challenging period ahead.