APEC and the Global Economy HTML File

APEC and the Global Economy

October 30, 2025

Thank you, President Lee Jae Myung, for the opportunity to share the IMF's latest global economic outlook with APEC leaders, whose economies together represent about 61 percent of global GDP.

As Korea is famous for building ships of all types-letme use a ship analogy.

Imagine a catamaran, cutting steadily through rough waters. This is what the world economy has proven to be: more resilient than many experts predicted, steadied by two hulls: one, sound institutions and policy fundamentals and, two, a dynamic and adaptable private sector. Decades of hard work have resulted in good policy frameworks such as inflation targeting and fiscal rules. Firms across APEC and beyond have quickly adjusted to shocks, with trade and investment frontloading, supply-chain strengthening, and compressed profit margins.

As a result, despite the policy shifts and transformations in geopolitics, trade, technology, and demography, growth has held up so far. Our forecast for global growth is 3.2 percent this year and 3.1 percent next year, slightly down from the 3.3 percent in 2024. For APEC, our forecast is a bit lower-growth of 3.1 percent in 2025 and 2.9 percent in 2026, down from 3.7 percent last year.

We project global inflation to decline further, to 4.2 percent in 2025 and 3.7 percent in 2026; for APEC, we see inflation hovering close to 2 percent in both years-and staying especially subdued in APEC emerging economies.

We recognize the high uncertainty around this outlook. Global economic prospects will depend on easing trade tensions, the scope and speed of AI's impact on productivity, the evolution of financial conditions, and how consumers and firms respond to the policy shifts and transformations underway.

We see four policy priorities: first, fix public finances wherever governments are overstretched; second, preserve financial stability; third, press forward on reforms to lift growth; and fourth, address excess imbalances.

First, the health of governments' finances. We forecast public debt in APEC to exceed 110 percent of GDP next year, with some APEC members at risk of seeing their debt burdens soon exceeding all-time highs registered after World War Two. This trend must be reversed to reduce borrowing costs and build buffers for the shocks yet to come. The good news is that there are enough policy options available to deliver a positive outcome.

Second, on preserving financial stability, the main risk may come from surging private investment in technology, notably AI. Embracing AI to lift productivity is a big plus, but we must guard against over-enthusiasm followed by abrupt reassessment and correction in the financial markets.

Third, on growth - more jobs, more revenue, and higher productivity are globally shared ambitions. Yet, in many economies the main driver of growth - private sector initiative - is held back by red tape, a self-inflicted injury. My call is for a regulatory clean-up to sweep away unwanted legacy rules and nontariff barriers, thereby facilitating more dynamism, more innovation, and more domestic and cross-border commerce.

Finally, on eliminating excess imbalances, we see a task that goes beyond trade policy-vital as that is-to deeper, underlying, macroeconomic factors: external rebalancing requires internal rebalancing. Economies that save too much need to spend more, supported by policies to lift confidence and remove distortions. Economies that consume too much need to save more, including by curbing their fiscal deficits. Rebalancing will be a gradual process, but history has shown that it is essential-and that all parties have skin in the game.

Regional cooperation can facilitate rebalancing and spur growth. As the trade landscape evolves, many economies are turning more attention to the opportunities afforded by regional cooperation and integration-this was evident at this week's highly successful ASEAN summit in Kuala Lumpur, which many of us had the privilege to attend.

Here at APEC, there are significant economic complementarities, and therefore ample potential for cooperation, that will benefit individual economies and the world as a whole. Sail forward together-it is the key to wise navigation.

Thank you.