The International Monetary Fund has upgraded its global economic growth projections for 2025 and 2026, citing easing trade tensions and front-loaded imports as key supporting factors.
In its July World Economic Outlook update, released on July 29, 2025, the IMF raised its forecast for global GDP growth in 2025 to 3.0%, up from the previous estimate of 2.8% in April, and expects growth to reach 3.1% in 2026, a modest increase from earlier projections.
The revision reflects a softer-than-anticipated impact from U.S. tariffs, which prior models had predicted would significantly disrupt global trade.
The fund noted that many companies accelerated imports ahead of tariff hikes, in a process termed “front‑loading,” which helped cushion the real‑time economic shock and supported trade volumes in early 2025.
IMF Chief Economist Pierre‑Olivier Gourinchas highlighted the decline in the effective U.S. tariff rate from around 24% in early April to approximately 17% by this quarter, helped by paused or scaled‑back tariff plans and new interim trade deals with the EU and Japan.
A weaker U.S. dollar also eased borrowing costs for emerging markets and helped stabilize global financial conditions.
The U.S. economy itself received a slight uplift in outlook, with 2025 growth now projected at 1.9%, rising to 2.0% in 2026, thanks in part to fiscal stimulus such as new tax cuts.
China’s projection saw a sharper upgrade to 4.8% growth in 2025, supported by eased trade restrictions and stronger domestic demand.
The euro area is now expected to grow at 1.0% in 2025, reflecting robust pharmaceutical exports from Ireland, while India remains the fastest-growing major economy with growth forecast at 6.4% in both 2025 and 2026.
Despite the improved outlook, the IMF warned that growth remains below pre-pandemicaverages, with 2024 growth recorded at 3.3% and pre-COVID expectations around 3.7%.
The fund emphasized that the current uptick may not fully reflect underlying strength but rather temporary boosts from stockpiling.
Risks remain focused on potential re-escalation of trade tensions, geopolitical instability, fiscal imbalances, and pressure on central bank independence.
Global inflation is expected to ease gradually from 4.2% in 2025 to 3.6% in 2026 but U.S. inflation may remain above target due to tariff-related price pressures.
IMF simulations suggest that if full tariff hikes are implemented, the world economy could lose up to 0.3 percentage points of growth by 2026.
The IMF stressed the importance of restoring policy confidence through predictable trade rules and preserving central bank autonomy.
It cautioned that the resilience observed is fragile and may unravel without structural reforms or durable trade resolutions.
In essence, the modest upgrade to 3.0% growth for 2025 and 3.1% for 2026 reflects a temporary reprieve from tariff shocks but global expansion remains subdued, with much hanging on whether trade talks can deliver lasting clarity and cooperation.
Written By Ian Maleve
