The International Monetary Fund (IMF) has slightly raised its global growth projection for 2025 to 3.3%, according to the latest World Economic Outlook (WEO) update for January 2025. This revision, however, still falls short of the historical average growth rate of 3.7% seen between 2000 and 2019.
The modest upward adjustment is largely attributed to an improved economic outlook for the United States, which helped offset downward revisions for other major economies.
Despite this positive shift, the IMF highlights ongoing economic hurdles, including tight financial conditions, geopolitical tensions, and inflationary pressures, which continue to pose significant challenges to global growth.
Global headline inflation is projected to decline further, reaching 4.2% in 2025 and 3.5% in 2026.
“Global growth is projected at 3.3 percent both in 2025 and 2026, below the historical (2000–19) average of 3.7 percent. 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 percent in 2025 and to 3.5 percent in 2026, converging back to target earlier in advanced economies than in emerging market and developing economies”, the report said.
The IMF noted that advanced economies are likely to meet inflation targets sooner than emerging market and developing economies, signaling a divergence in economic recovery trajectories.
The report highlights the need for policymakers to maintain a balance between curbing inflation and supporting growth, as global economies navigate the post-pandemic landscape.
“Medium-term risks to the baseline are tilted to the downside, while the near-term outlook is characterized by divergent risks. 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 outlook added.
