Global growth outlook brightens as IMF raises 2025 forecast to 3.0%

The International Monetary Fund (IMF) has raised its global growth forecast for 2025, citing stronger-than-expected resilience in major economies and an improved policy environment. 

In its latest World Economic Outlook update, the IMF projects global GDP growth at 3.0 percent for 2025 – up 0.2 percentage point from its April forecast – followed by a slight uptick to 3.1 percent in 2026.

The upward revision reflects several positive developments: front-loaded activity in anticipation of higher trade tariffs, a lower-than-expected average effective US tariff rate, improving financial conditions, and fiscal expansion in key economies.

Despite a first-quarter real GDP contraction in the United States, the IMF nudged the US's 2025 growth forecast to 1.9 percent, up 0.1 percentage point. The euro area is now expected to grow by 1.0 percent in 2025, up 0.2 percentage point, thanks to robust performance in the first quarter where GDP expanded, driven by investment and net exports.

China saw the largest upward revision among major economies, with projected growth now at 4.8 percent for 2025 – a 0.8-percentage point increase. The Chinese economy expanded at an annualized 6.0 percent in real terms in the first quarter according to IMF's data, significantly outperforming expectations. While exports to the US declined, they were more than offset by strong demand from other parts of the world.

Global headline inflation is expected to ease to 4.2 percent in 2025 and 3.6 percent in 2026, continuing its downward trend. However, inflationary pressures remain uneven, with forecasts indicating US inflation will stay above target, while other large economies are likely to see more subdued price increases.

Pierre-Olivier Gourinchas, the IMF's chief economist, noted that the global economy is holding up better than anticipated, but warned that trade tensions still pose a significant drag. "While the trade shock could turn out to be less severe than initially feared, it is still sizeable, and evidence is mounting that it is hurting the global economy," he said.

In light of ongoing volatility, the IMF emphasized the need to restore stability in global trade policy, urging collective action to reduce uncertainty and rebuild trust in the multilateral trading system.

The report also underscored the importance of central bank independence. "The ability of central banks to act decisively without political interference has been critical to restoring price stability," said Gourinchas.

While the global outlook has brightened, risks remain tilted to the downside, especially if trade fragmentation deepens or inflation proves more persistent than expected, cautioned the IMF.