The January 2025 World Economic Outlook Update from the IMF highlights a global growth forecast of 3.3% for both 2025 and 2026, which remains below the historical average. Growth prospects vary widely across economies, with the U.S. seeing an upward revision due to strong consumption, while other major economies, including China and the euro area, face downward adjustments due to weak manufacturing, trade policy uncertainty, and subdued investment. Inflation is expected to decline gradually, though progress is uneven, with advanced economies converging toward target rates faster than emerging markets.
Global financial conditions remain relatively loose but are tightening in some regions, with interest rate differentials driving a stronger U.S. dollar. Trade policy uncertainty has increased, affecting investment and contributing to market volatility. Energy prices are expected to decline due to weak Chinese demand, while food prices may rise due to adverse weather.
Risks to the outlook are tilted to the downside, including potential trade disruptions, geopolitical tensions, and monetary policy divergence, which could lead to capital outflows from emerging markets. The IMF recommends a balanced policy approach that supports economic stability while ensuring long-term growth through structural reforms, fiscal discipline, and enhanced multilateral cooperation.
