Global financial institution IMF raises 2025 growth projection due to partial relief in trade disputes, as economy remains precarious
The International Monetary Fund (IMF) has revised its global growth forecast for 2025, predicting a 3.0 percent expansion, an increase of 0.2 percentage points from its April 2025 projection [1][2][3]. The forecast for 2026 is set at 3.1 percent, a 0.1 percentage point increase from the previous outlook [1][2][3].
The upward revision is attributed to several factors. Stronger-than-expected front-loading of economic activity, lower average effective U.S. tariff rates, easier financial conditions, and fiscal expansion in some major economies or jurisdictions have combined to create a more optimistic near-term growth outlook [1][2][3]. These factors have helped offset the ongoing impact of trade tensions, which slightly depress overall growth potential below pre-April forecasts [1][2][3].
One of the key factors contributing to the improved outlook is the lowering of tariffs. For instance, Washington and Beijing agreed to lower triple-digit duties on each other's goods for 90 days [4]. Additionally, Trump paused higher tariffs on dozens of economies until August 1 [4]. These actions have led to a reduction in the effective U.S. tariff rate, which was previously at 17.3 percent, significantly above the 3.5 percent level for the rest of the world [4].
The improved economic conditions have also been reflected in the revised growth forecasts for various countries. Germany is still expected to avoid contraction, while forecasts for France and Spain remain unchanged at 0.6 percent and 2.5 percent respectively [4]. The growth in China was revised upwards to 4.8 percent due to stronger-than-expected activity in the first half of 2025 and the significant reduction in US-China tariffs [4]. On the other hand, Russia's growth was revised down to 0.9 percent partially due to Russian policies and relatively subdued oil prices compared with 2024 levels [4].
However, the IMF emphasizes that while these factors have improved the growth outlook, the global economy still faces challenges [1][2][3]. The ongoing impact of trade tensions, which depress overall growth potential somewhat below pre-April forecasts, remains a concern [1][2][3]. The IMF warns that if deals unravel or tariffs rebound to higher levels, global output would be 0.3 percent down next year [1][2][3].
In summary, the upward revision to 3.0% for 2025 reflects better-than-expected economic front-loading, reduced tariffs, more accommodative financial conditions, and fiscal stimulus in some regions. However, the global economy still faces challenges, including the ongoing impact of trade tensions that depress overall growth potential somewhat below pre-April forecasts.
[1] IMF (2025). World Economic Outlook Update, April. [2] IMF (2025). World Economic Outlook Update, July. [3] IMF (2025). Press Release, July 15. [4] Bloomberg (2025). IMF Raises Global Growth Forecast to 3.0 Percent. July 15.
- The lowering of tariffs between major economies, such as the agreement between Washington and Beijing, and the pause on higher tariffs by Trump, have improved the business environment for investing in the industry and finance sectors.
- The positive impact of fiscal expansion in some major economies or jurisdictions, combined with easier financial conditions, has created a more optimistic near-term growth outlook for various businesses and the finance industry.
