The International Monetary Fund on Tuesday lifted its outlook for global growth this year, flagging a milder-than-expected economic hit from President Donald Trump鈥檚 tariff policies while warning of risks ahead.
In its flagship World Economic Outlook (WEO) report 鈥� compiled before the most recent US-China tariff spat 鈥� the IMF hiked its 2025 global growth forecast to 3.2 per cent, up from 3.0 in July, while leaving its prediction for 2026 unchanged at 3.1 per cent.
鈥楾he good news is that growth impact of the trade shock is modest so far,鈥� IMF chief economist Pierre-Olivier Gourinchas told reporters ahead of the publication of the WEO, adding that the private sector had also supported growth by responding to Trump鈥檚 tariffs in an agile way.
Other factors, including the AI boom and fiscal policies in Europe and China had also helped to prop up the global economy, he said, while warning that the IMF still saw downside risks to growth from the trade uncertainty.
Since returning to office, Trump has imposed sweeping tariffs on top trading partners including China and the European Union in a bid to reshape US trading relationships and boost domestic manufacturing.
Over the weekend, the US president threatened fresh tariffs of 100 per cent on China, on top of current steep levies, criticising Beijing鈥檚 recent decision to tighten export controls on the rare earth minerals crucial to the defence and high tech sectors.
鈥楨verything is very fluid,鈥� Gourinchas told AFP in an interview. 鈥楤ut I think it鈥檚 a very useful reminder that we live in a world in which this kind of increase in trade tensions, increase in policy uncertainty, can flare up at any time.鈥�
The IMF expects the global inflation rate to remain elevated at 4.2 per cent this year and 3.7 per cent in 2026, underpinned by elevated inflation in several countries including the United States.
The IMF raised its prospects for economic growth for the world鈥檚 largest economy by 0.1 per cent this year and next, to 2.0 per cent in 2025, and to 2.1 per cent in 2026.
However, this still represents a marked slowdown from 2024, when US growth hit 2.8 per cent.
Despite the trade tensions between the world鈥檚 two biggest economies, the Fund still expects China鈥檚 economy to slow to 4.8 per cent this year from 5.0 per cent in 2024, before cooling sharply to just 4.2 per cent in 2026, in line with previous estimates.
China slowdown has been driven by a reduction in net exports which have been at least partly offset by growing domestic demand fuelled by 鈥榩olicy stimulus,鈥� the Fund said.
Elsewhere in Asia, the IMF raised India鈥檚 2025 growth forecast to 6.6 per cent from 6.4 per cent in the last outlook update in July, and hiked its prediction for growth in Japan to 1.1 per cent 鈥� up 0.4 percentage point.
The outlook for Europe has improved slightly from July, with the Eurozone now expected to grow by 1.2 per cent this year and by 1.1 per cent in 2026.
While this reflects a slight increase from last year, it remains well below the strong growth seen in the United States, underscoring the enduring challenges faced by some of Europe鈥檚 largest economies.
Germany鈥檚 economy is expected to bounce back from recession to register growth of 0.2 per cent this year, up 0.1 percentage point, before picking up to 0.9 per cent next year.
And France, which is in the midst of a prolonged political crisis, is expected to see growth cool to 0.7 per cent this year, before rising slightly to 0.9 per cent in 2026.
The one market exception in the Eurozone is Spain, which saw an upgrade and is now expected to see growth remain resilient at 2.9 per cent this year and 2.0 per cent in 2026.
Growth in the United Kingdom is now expected hit 1.3 per cent this year and next.
As the war in Ukraine continues, the Russian economy is likely to see a marked slowdown in growth this year to just 0.6 per cent this year from 4.3 per cent in 2024, the IMF said, cutting its outlook by 0.4 percentage point.