WASHINGTON: The International Monetary Fund on Tuesday raised its global growth forecast for 2025 as efforts to circumvent US President Donald Trump’s sweeping tariffs sparked a bigger-than-expected surge in trade, while Trump stepped back from some of his harshest threats.
But the IMF still sees growth slowing this year, even as it lifted its 2025 projection to 3.0 percent, up from 2.8 percent in April.
The expected figure for 2026 was raised to 3.1 percent in the IMF’s World Economic Outlook update.
IMF said that the world economy will keep weakening and remains vulnerable to trade shocks, even though it is showing some resilience to Trump’s tariffs.
The Washington-based lender sees global growth decelerating to 3 percent in 2025 from 3.3 percent last year amid disruption from the US president’s attempts to rewire commerce.
The projections are slightly better than those in April, but largely reflect distortions such as front-loading in anticipation of tariffs.
“While the trade shock could turn out to be less severe than initially feared, it is still sizable, and evidence is mounting that it is hurting the global economy,” IMF Chief Economist Pierre-Olivier Gourinchas told reporters. “The current trade environment remains precarious.”
The assessment depicts a backdrop replete with storm clouds ranging from possible unravelling of trade deals, the weight of uncertainty bearing on investment, geopolitical tensions, high public debt and mounting US inflation pressures.
“Global growth is expected to decelerate, with apparent resilience due to trade-related distortions waning,” the IMF said.
“Even if tariff rates do not change relative to what is assumed in the baseline and no new protectionist measures are introduced, elevated trade policy uncertainty could start weighing more heavily on activity.”
The upgrade for growth this year was explained by improved financial conditions due to a weaker dollar, lower average effective US tariff rates than announced in April and the positive impact of businesses attempting to front-run import levies in the first quarter.
On the US, officials raised their GDP outlook for 2025 by 0.1 percentage point to 1.9 percent. That improvement masks private demand cooling faster than expected, and weaker immigration, the IMF said.
Meanwhile, expansion should pick up slightly to 2 percent in 2026 as tax incentives for corporate investment from Trump’s “one big beautiful bill” kick in.
For the euro area, the IMF raised its projection for expansion this year to 1 percent while keeping its forecast for 2026 unchanged at 1.2 percent.
The upgrade from April amounted to 0.2 percentage points and is partly due to pharmaceutical exports from Ireland.
The IMF report didn’t touch on the effect of Trump’s announced trade deal this week with the European Union, which will impose a 15 percent levy on almost all imports, including cars.
China’s improved trade terms with the US, compared to three months ago, are reflected in the IMF projections.
It raised its 2025 outlook for the country by 0.8 percentage point to 4.8 percent, noting the lower levies and stronger-than-expected activity in the first half.
The IMF emphasised the need for a more tranquil political and economic backdrop, and warned against bloated public finances.
“Policies need to bring confidence, predictability, and sustainability by calming tensions, preserving price and financial stability, restoring fiscal buffers, and implementing much-needed structural reforms,” the IMF said.
“The ambiguous and volatile landscape also requires clear and consistent messaging from central banks and the protection of central bank independence, not only in legal terms, but also in practice.”
