IMF: Global growth – divergent and uncertain
Global growth is projected at 3.3 per cent both in 2025 and 2026, below the historical (2000–19) average of 3.7 per cent, the International Monetary Fund (IMF) said in its World Economic Outlook update, released on January 17.
The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook (WEO), primarily on account of an upward revision in the United States offsetting downward revisions in other major economies.
Global headline inflation is expected to decline to 4.2 per cent in 2025 and to 3.5 per cent in 2026, converging back to target earlier in advanced economies than in emerging market and developing economies.
Medium-term risks to the baseline are tilted to the downside, while the near-term outlook is characterized by divergent risks, the IMF said.
Upside risks could lift already-robust growth in the United States in the short run, whereas risks in other countries are on the downside amid elevated policy uncertainty.
Policy-generated disruptions to the ongoing disinflation process could interrupt the pivot to easing monetary policy, with implications for fiscal sustainability and financial stability.
“Managing these risks requires a keen policy focus on balancing trade-offs between inflation and real activity, rebuilding buffers, and lifting medium-term growth prospects through stepped-up structural reforms as well as stronger multilateral rules and cooperation,” the IMF said.
In the euro zone, growth is expected to pick up but at a more gradual pace than anticipated in
October, with geopolitical tensions continuing to weigh on sentiment.
Weaker-than-expected momentum at the end of 2024, especially in manufacturing, and heightened political and policy uncertainty explain a downward revision of 0.2 per centage point to 1.0 per cent in 2025.
In 2026, growth is set to rise to 1.4 per cent, helped by stronger domestic demand, as financial conditions loosen, confidence improves, and uncertainty recedes somewhat, the report said.
(Photo: Bruno Sanchez Andrade)