Global Economic Forecast Refinement for 2025: 3.0% Expansion by IMF
The International Monetary Fund (IMF) has made an upward revision to its global economic growth projections for 2025 and 2026. For 2025, the projected growth stands at 3.0%, a 0.2 percentage point increase from its April 2025 forecast. The growth for 2026 is expected to be 3.1%, 0.1 point higher than the previous forecast.
This optimistic outlook is largely attributed to several factors. Firstly, countries have accelerated spending and investment ahead of tariffs, a phenomenon known as front-loading of economic activities. Secondly, trade tensions have resulted in lower-than-expected effective tariff rates. Thirdly, the weaker US dollar has made exports more competitive, providing monetary policy space for emerging market and developing economies. Lastly, improved financial market conditions and fiscal expansion in some major economies have helped stimulate growth.
However, IMF Economic Counsellor Pierre-Olivier Gourinchas cautions that this economic resilience is fragile and tenuous. The predicted growth remains below pre-COVID averages, and trade uncertainties pose downside risks to the global economy. For instance, the potential resetting of tariffs after August 1, 2025, could disrupt global trade and cause distortions in the economy.
Despite these concerns, Gourinchas acknowledges that the trade shock could be less severe than initially feared. However, he emphasises that it is still "sizeable" and hurting the global economy. The IMF has lowered its assumed U.S. tariff rate to about 17% from around 24%.
In summary, while the IMF is more optimistic about the 2025-2026 growth than earlier in 2025, it cautions about the persistently high uncertainty due to trade tensions and global economic vulnerabilities.
- The increase in projected global economic growth for 2025 and 2026, according to the IMF, can be linked to various factors, including lower-than-expected effective tariff rates due to trade tensions.
- The weaker US dollar, as a result of trade tensions, has created more competitive exports and offered monetary policy space for emerging market and developing economies.
- Despite the IMF's optimization about the growth in 2025-2026, the economic resilience is considered fragile due to ongoing trade uncertainties, such as potential tariff resetting after August 1, 2025, which could cause disruptions to the global economy.
