IMF lifts 2025 global growth outlook, but warns against protectionism
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I.M.F. Chief Economist Pierre-Olivier Gourinchas speaking at the I.M.F.-World Bank meetings in Washington on Tuesday.Credit...Brendan Smialowski/Agence France-Presse — Getty Images
The International Monetary Fund (IMF) has slightly raised its global growth forecast for 2025, expecting global growth to reach 3.3 percent this year, with a stable outlook of the same rate for 2026. In its latest World Economic Outlook, the IMF highlighted that although the global growth forecast has remained largely unchanged since October, there are growing economic disparities between different countries, largely driven by recent political shifts and heightened economic policy uncertainty.
IMF Chief Economist Pierre-Olivier Gourinchas noted in a blog post that the election of new governments in 2024 could lead to more uncertainty in economic policies. As governments change, economic policy could shift, influencing both domestic and international markets. Despite this uncertainty, the IMF’s overall assessment remains positive, though it acknowledges that global growth patterns are diverging. The United States’ economic outlook has been revised upward by 0.5 percentage points, now forecasted to grow at 2.7 percent in 2025. On the other hand, the economic growth outlook for the Eurozone has been downgraded slightly, falling by 0.2 percentage points to a growth of just 1 percent.
Emerging markets, including sub-Saharan Africa, are expected to maintain stable growth. In particular, the IMF predicts that sub-Saharan Africa’s growth will pick up to 4.2 percent this year, reflecting some regional optimism. This positive outlook for emerging economies is expected to offset some of the weaker projections in developed regions.
Global inflation, which has been a significant concern in recent years, is also anticipated to continue its deceleration. The IMF forecasts that inflation will decrease to 4.2 percent in 2025 and further to 3.5 percent by 2026. This reduction in inflation is seen as a signal of a broader return to economic stability, which would allow central banks to normalize monetary policies after the disruptions of the past few years.
However, the IMF has expressed concerns about the direction of world trade. The institution slightly downgraded its global trade volume estimates for both 2025 and 2026. This revision is due to increased trade policy uncertainty, especially with rising protectionism in some parts of the world. The IMF warned that protectionist measures, including tariffs and trade barriers, could escalate trade tensions, harm investment flows, and disrupt supply chains, undermining global economic stability.
The IMF’s caution regarding protectionism comes amid growing concerns over the global trade environment, particularly in light of political shifts in major economies. As the IMF’s forecast coincides with the lead-up to the inauguration of US President-elect Donald Trump, who has proposed a 10 percent tariff on global imports, there is significant concern over the potential rise of such protectionist measures. These policies could lead to higher costs, reduced global cooperation, and weakened economic growth worldwide.
In summary, while the IMF’s latest forecast reflects moderate optimism for global growth, it also underscores the risks posed by rising protectionism and trade uncertainties. With inflation slowing and emerging markets showing promise, the global economy could see continued recovery, but this progress may be hampered by the growing trend of unilateral trade policies and geopolitical tensions. The IMF’s cautionary stance calls for careful attention to global trade dynamics and the need for cooperative, multilateral solutions to foster long-term stability.
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