Kuwait city: Rising uncertainty, tariff tensions, and inflation disparities continue to cloud the outlook, International Monetary Fund warned in a statement on Tuesday. Global growth is projected at 3.0 percent in 2025 and 3.1 percent in 2026, marking an upward revision from the April 2025 World Economic Outlook. According to Kuwait News Agency, the improvement reflects stronger-than-expected front-loading ahead of anticipated tariffs, lower average effective US tariff rates, improved financial conditions supported by a weaker dollar, and fiscal expansion in some major economies. Global inflation is expected to ease, with headline rates falling to 4.2 percent in 2025 and 3.6 percent in 2026, largely in line with previous forecasts. However, inflation in the United States is expected to remain above target, while being more subdued in other large economies. Risks to the outlook remain tilted to the downside; a rebound in tariff rates, unresolved trade negotiations, and rising geopolitical tensions could wei gh on growth. Elevated fiscal deficits or increased risk aversion could push up long-term interest rates and tighten global financial conditions. However, successful trade deals that reduce uncertainty and lower tariffs could support stronger global growth. Since April, uncertainty has remained elevated, despite lower effective tariff rates. On May 12, China and the US agreed to temporarily reduce tariffs introduced after the April 2 escalation, with the pause lasting until August 12. The US has extended its suspension of higher tariffs to August 1, but recent letters to trading partners hint at even steeper duties ahead. Meanwhile, legal challenges are ongoing over the US administration's use of emergency powers to impose tariffs. Although the passage of the One Big Beautiful Bill Act in July provided clarity on near-term fiscal policy, it has added to concerns about longer-term fiscal sustainability.
