An economic forecast is a prediction of the future performance of an economy. It is typically based on mathematical models that describe the relationships among variables in time series data.
The model-based approach is the most commonly used method for predicting economic activity. Typical methods are statistical regressions, time series analysis, and econometric models like linear and nonlinear models. These models use the historical data to determine a set of relationships between the dependent and independent variables and then predict their future values.
Consumer spending is expected to continue slowing, as high tariffs feed through into consumer prices, weakening purchasing power and accelerating wage growth. This will be compounded by slowing housing demand. Rising delinquency rates on credit cards and auto loans will limit household debt-financed spending as well. Inflation is expected to decline from high levels as lower commodity prices push down headline inflation, but underlying (core) inflation will fall more slowly.
Low-income countries face a slower growth outlook amid the rise in global trade barriers and elevated uncertainty. Growth is projected to slow to 5.8 percent in 2025 and average 6.2 percent in 2026-27. Per capita income is still below pre-pandemic levels, and risks to the outlook are skewed to the downside, including a tighter global financial environment raising borrowing costs, renewed surges in violence and social unrest, and reduced aid support reducing fiscal space for debt-servicing.
America can lead again, but not by doubling down on failed policies. Tax cuts, runaway spending and regulatory excess must be reined in before a long slump turns into the new normal, robbing generations of prosperity.