IMF Raises 2025 Global Growth Forecast to 3.2% — Evening Brief – 10.20.25
The International Monetary Fund (IMF) raised its 2025 global growth forecast to 3.2%, up from 3.0% in July, citing easing financial conditions, resilient global trade, and a stronger-than-expected rebound in investment fueled by fiscal expansion and technology spending. The upgrade marks a notable shift in tone from the IMF’s midyear assessment, reflecting better alignment between monetary and fiscal policy across major economies.
In its latest World Economic Outlook, the IMF said recent trade diplomacy had helped avert the worst-case scenarios tied to U.S. President Donald Trump’s proposed tariff escalation, as several trade partners—including the European Union, Japan, and South Korea—secured targeted exemptions or entered new bilateral agreements. Private firms also adapted quickly by front-loading imports and rerouting supply chains, mitigating near-term disruption.
“Global activity has proven more resilient than expected, aided by adaptive trade patterns, proactive fiscal measures, and easing credit conditions,” said Pierre-Olivier Gourinchas, IMF Chief Economist. “However, the outlook remains highly sensitive to renewed trade frictions or sharper-than-expected financial tightening.”
The IMF noted that Europe and China’s fiscal support, a weaker U.S. dollar, and the ongoing boom in AI-related investment have collectively underpinned growth momentum. Investment in AI infrastructure, semiconductor production, and digital services is projected to contribute as much as 0.3 percentage points to global GDP growth in 2025, particularly benefiting advanced economies with strong innovation ecosystems.
However, trade risks continue to cast a shadow over the outlook. Gourinchas cautioned that if tariffs rise sharply—particularly in the event of a full-scale trade conflict between the U.S. and China—global growth could fall by 1.2 percentage points in 2026 and 1.8 percentage points by 2027, reflecting higher inflation, weaker investment, and diminished demand for U.S. assets.
Despite persistent uncertainty, the IMF’s baseline forecast suggests that the U.S. economy remains resilient, supported by consumer spending and corporate investment. U.S. growth is now projected at 2.0% in 2025, up slightly from 1.9% in July, while 2026 growth is expected at 2.1%, following a stronger 2.8% expansion in 2024.
In the euro area, growth is projected to reach 1.2% in 2025. Japan’s forecast was raised to 1.1%, and China’s economy is expected to grow 4.8%.
Global inflation is expected to moderate gradually, averaging 4.2% in 2025 and 3.7% in 2026. While price pressures are easing in Asia—particularly in China, India, and Thailand—the IMF expects U.S. inflation to rise modestly, reflecting the pass-through of tariff costs to consumers and businesses.