Kuwait city: The International Monetary Fund (IMF) has revised its 2025 global growth forecast upward to 3.2 percent but cautions about challenges due to evolving financial and trade policies. The IMF's October 2025 World Economic Outlook report highlights the global economy's adaptation to new policy landscapes.
According to Kuwait News Agency, the IMF reports some moderation in the extremes of higher tariffs thanks to recent deals and adjustments. However, the overall environment remains volatile, with temporary factors that bolstered activity in early 2025, like front-loading, diminishing. Consequently, global growth projections have been adjusted upward relative to the April 2025 World Economic Outlook but remain lower than pre-policy-shift forecasts. The IMF projects a slowdown in global growth from 3.3 percent in 2024 to 3.2 percent in 2025 and 3.1 percent in 2026, with advanced economies growing around 1.5 percent and emerging markets and developing economies just above 4 percent.
The IMF also forecasts a global decline in inflation, with variations across countries. In the United States, inflation is expected to remain above target with risks skewed to the upside, while it is anticipated to be subdued elsewhere. The report identifies downside risks such as prolonged uncertainty, increased protectionism, and labor supply shocks that could hinder growth. Additionally, fiscal vulnerabilities, potential financial market corrections, and institutional erosion pose threats to stability.
The IMF urges policymakers to restore confidence through credible, transparent, and sustainable policies. It emphasizes the importance of trade diplomacy paired with macroeconomic adjustments, rebuilding fiscal buffers, preserving central bank independence, and enhancing structural reforms. The report also discusses the role of industrial policy, highlighting the need for careful consideration of opportunity costs and trade-offs.
The IMF's report acknowledges the impact of the United States' sweeping tariffs announced in April, which disrupted global trade norms. However, it notes that the growth downgrade has been on the modest end of projections due to trade deals, exemptions, and the private sector's agility in adapting supply chains. Despite this, the report warns against premature conclusions, highlighting ongoing trade tensions and the potential for tariffs to affect US consumers and global efficiency.
Other economic factors, such as tighter US immigration policies and AI-driven investment, are also influencing the economic landscape. The IMF notes that China, Germany, and emerging markets are employing various strategies to mitigate the effects of tariffs and maintain growth.
Despite these efforts, the IMF expects a slowdown in the latter half of the year, with only a partial recovery in 2026. Inflation is projected to remain persistently higher than previous forecasts. The report concludes that ongoing trade tensions and supply chain disruptions could further lower global output, emphasizing the fragility of the current economic outlook and the downside risks that remain.