IMF publishes update to world economic outlook

IMF publishes update to world economic outlook

The International Monetary Fund (IMF) has released its latest update to the World Economic Outlook, providing a nuanced view of the global economic landscape. The report, published on July 2, 2025, highlights both the resilience and vulnerabilities of the world economy, particularly in the face of ongoing trade tensions and policy uncertainties.

The IMF projects global economic growth to decelerate to 3% in 2025, down from 3.3% in 2024. This slower growth is attributed to the lingering effects of Donald Trump’s tariffs and the broader trade disruptions they have caused. Despite the tariffs, the IMF notes that the global economy has shown some resilience, largely due to businesses front-loading imports and the suspension of some of the largest tariffs [1].

The IMF’s Chief Economist, Pierre-Olivier Gourinchas, emphasized that while the trade shock could be less severe than initially feared, it is still significant and is hurting the global economy. The report underscores the precariousness of the current trade environment, which includes potential unraveling of trade deals, geopolitical tensions, high public debt, and mounting US inflation pressures [1].

The IMF also upgraded its growth outlook for the United States, predicting a 1.9% expansion in 2025, up from 1.8% in April. This improvement is partly due to a weaker dollar and lower average effective US tariff rates. However, the report cautions that private demand is cooling faster than expected and that immigration is weakening. For 2026, the IMF expects US growth to pick up to 2% as tax incentives for corporate investment kick in [1].

Emerging market and developing economies are expected to grow at 4.1% in 2025, up from 3.7% in April. This upgrade is driven by frontloading and a more optimistic outlook for China, whose economy is projected to expand 4.8% in 2025, up from 4.0% in April. The IMF attributes this growth to stronger-than-expected activity in the first half of the year and the reduction in U.S.-China tariffs [3].

The euro area is expected to expand by 1% in 2025, up from 0.8% in April, largely due to a surge in pharmaceutical exports from Ireland. However, the IMF warns that the impact of Trump’s announced trade deal with the European Union, which imposes a 15% levy on almost all imports including cars, could lead to a 0.4% hit to euro-area output over the next two to three years [1].

The IMF emphasizes the need for a more tranquil political and economic backdrop, warning against bloated public finances. It also predicts that the Federal Reserve and the Bank of England will lower borrowing costs in the second half of 2025, while the European Central Bank’s policy rate is expected to remain unchanged [1].

In conclusion, the IMF’s latest update to the World Economic Outlook underscores the ongoing challenges and uncertainties facing the global economy. While there are signs of resilience, the report highlights the need for clear and consistent policy messaging and structural reforms to navigate the current precarious landscape.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-29/world-s-precarious-trade-backdrop-is-hurting-growth-imf-says
[2] https://www.asahi.com/ajw/articles/15935449
[3] https://finance.yahoo.com/news/imf-lifts-2025-gdp-emerging-130446247.html