The International Monetary Fund (IMF) has released its latest World Economic Outlook report, projecting a slight uptick in global economic growth for the coming year. The IMF anticipates a growth rate of 3.3% in 2025 and 2026, a marginal increase from the previous year's 3.2%. However, this growth rate falls short of the average of 3.7% seen from 2000 to 2019.
The IMF attributes the sluggish growth to various global shocks, including the lingering impacts of the COVID-19 pandemic and geopolitical tensions such as Russia's invasion of Ukraine.
Global inflation, which spiked due to pandemic-related disruptions, is expected to decline from 5.7% in 2024 to 4.2% in 2025 and further to 3.5% in 2026. The IMF cautions that certain policy measures proposed by President-elect Donald Trump, such as tax cuts and tariffs, could potentially push inflation higher in the short term.
The IMF's chief economist highlighted concerns over Trump's proposed policies, warning that tax cuts and tariffs may lead to overheating of the U.S. economy and higher inflation. On the other hand, deregulation could stimulate innovation but also pose risks to financial stability.
Despite these uncertainties, the IMF has upgraded its growth forecast for the United States to 2.7% for the current year, citing a robust job market and consumer confidence. In contrast, the eurozone is expected to see slower growth due to weak momentum and low consumer confidence.
China, the world's second-largest economy, is projected to experience a slowdown in growth, with concerns over a potential debt-deflation stagnation trap if adequate stimulus measures are not implemented.
While the IMF's forecasts are relatively optimistic, the World Bank has expressed concerns about global growth not being sufficient to alleviate poverty in low-income countries. The IMF's projections tend to be more optimistic, emphasizing the growth potential of developing nations.
