Major policy shifts this year have been adding to unknowns about the future and policy decisions, according to our World Uncertainty Index, which has doubled since January.
Uncertainty has surged to an exceptionally high level globally, and it’s likely here to stay, as the IMF noted during the recent Annual Meetings.
To better understand what causes this and what it reveals, we developed a new subcomponent of that measure, the World Policy Uncertainty Index, which, like its counterpart, is drawn from textual sources. Our new gauge tracks reports by the Economist Intelligence Unit by tallying country-level references to “uncertain,” “uncertainty,” and “uncertainties” in passages related to “policy,” “policymaking,” as well as words related to politics, such as “election,” “government,” and “vote.” It covers 71 advanced countries, emerging markets, and developing economies.
The Chart of the Week shows that a recent record monthly level for policy uncertainty was accompanied by relatively upbeat readings for our World Sentiment Index—echoing recent IMF forecasts that the global economy remains resilient and is slowing only modestly. This resilience can be attributed to improved policies, especially in emerging markets, alongside better business adaptability—but elevated uncertainty may be a new normal.
