IMF upgrades global growth outlook, remains below historical average

Logo of International Monetary Fund (IMF)

The International Monetary Fund (IMF) slightly raised its global growth forecasts for 2025 and 2026, on the back of stronger-than-anticipated spending ahead of the Aug. 1 hike in US tariffs and a pullback in the effective US tariff rate to 17.3% from 24.4%.

In its report released today, July 29, the fund unveiled a modest upgrade of a 0.2 percentage point in its global growth forecast, to 3.0% for 2025, and by 0.1 percentage points to 3.1% for 2026, against its April estimates.

However, its forecast remains below the 3.3% growth rate it had projected in January for both years, and the pre-pandemic historical average of 3.7%, reflecting a slowdown from 3.3% for 2024.

The report also projected global inflation to reach 4.2% in 2025 and 3.6% in 2026. However, it noted that inflation would likely remain above the US target rate as tariffs on American consumers get enforced in the second half of the year.

Meanwhile, the IMF warned that the global economy faces significant ongoing risks, including a potential rebound in tariff rates, geopolitical tensions, and larger fiscal deficits that could push interest rates higher and further strain global financial conditions.

Pierre-Olivier Gourinchas, Chief Economist at IMF, said this year's outlook had been helped by what he called "a tremendous amount" of front-loading as businesses tried to get ahead of the tariffs, but the stock-piling boost would not last.

He explained, "That is going to be a drag on economic activity in the second half of the year and into 2026. There is going to be pay-back for that front loading, and that is one of the risks we face."

The fund also raised its US growth forecast for this year by 0.1 percentage points, compared to its April report. It also upgraded its growth outlook for Saudi Arabia by 0.6 percentage points, and for China by 0.8 percentage points.

Moreover, it hiked its economic growth forecast for emerging markets and developing economies this year to 4.1% from 3.7%, and to 4% from 3.9% next year, driven by stimulus plans and a more optimistic outlook on China.