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E-mail Xinhua, January 18, 2025
The International Monetary Fund (IMF) on Friday slightly upgraded its global growth forecast in 2025 to 3.3 percent, 0.1 percentage point up from its projection in October 2024, according to an update to its World Economic Outlook (WEO).
Economic policy uncertainty is elevated, with many governments newly elected in 2024, IMF Chief Economist Pierre-Olivier Gourinchas said in a blog posted on Friday.
Though the global growth outlook is broadly unchanged from October, "divergences across countries are widening," Gourinchas added.
The U.S. economic growth forecast for 2025 has been revised upward by 0.5 percentage points to 2.7 percent, while the Eurozone forecast has been downgraded by 0.2 percentage points to 1 percent.
The growth outlook for emerging market economies remains stable at 4.2 percent. The update also showed that China's economic growth forecast for 2025 has been revised upward to 4.6 percent, up 0.1 percentage point from October's projection.
The IMF chief economist noted that the latest projections incorporate recent market developments and the impact of heightened trade policy uncertainty, which is assumed to be temporary, but the IMF refrains from "making assumptions" about potential policy changes that are still under public debate.
On the U.S. economy, Gourinchas said that "while many of the policy shifts under the incoming U.S. administration are hard to quantify precisely, they are likely to push inflation higher in the near term relative to our baseline."
"Some indicated policies, such as looser fiscal policy or deregulation efforts, would stimulate aggregate demand and increase inflation in the near term, as spending and investment increase immediately," Gourinchas said.
"Other policies, such as higher tariffs or immigration curbs, will play out like negative supply shocks, reducing output and adding to price pressures," he continued.
The IMF chief economist noted that for several countries, fiscal policy efforts have been delayed or insufficient to stabilize debt dynamics. "It is now urgent to restore fiscal sustainability before it is too late and to build sufficient buffers to address future shocks that could be sizable and recurrent," he said.
He also called for additional efforts to strengthen and improve multilateral institutions to "help unlock a richer, more resilient, and sustainable global economy."
"Unilateral policies that distort competition -- such as tariffs, nontariff barriers, or subsidies -- rarely improve domestic prospects durably. They are unlikely to ameliorate external imbalances and may instead hurt trading partners, spur retaliation, and leave every country worse off," he said.
