The International Monetary Fund (IMF) has slightly upgraded its global growth projection for 2025 to 3.3%, according to the latest update of its World Economic Outlook (WEO) in January 2025.This forecast still falls short of the historical growth average of 3.7% recorded between 2000 and 2019.

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The modest increase in growth expectations is driven by a more favorable outlook for the United States, which offset downward adjustments for other major economies.However, the outlook still emphasizes ongoing economic headwinds, including tightening financial conditions, geopolitical uncertainties, and persistent inflationary pressures.Global inflation is expected to continue its downward trend, reaching 4.2% in 2025 and 3.5% in 2026.

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“Global growth is projected at 3.3 percent both in 2025 and 2026, below the historical (2000–19) average of 3.7 percent. The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook (WEO), primarily on account of an upward revision in the United States offsetting downward revisions in other major economies. Global headline inflation is expected to decline to 4.2 percent in 2025 and to 3.

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5 percent in 2026, converging back to target earlier in advanced economies than in emerging market and developing economies”, the report said.The IMF pointed out that developed economies are expected to achieve their inflation targets sooner than emerging markets and developing economies, indicating differing paths to economic recovery.

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textDownloadThe report stresses the importance for policymakers to strike a balance between controlling inflation and fostering growth as global economies continue to adjust in the post-pandemic era.“Medium-term risks to the baseline are tilted to the downside, while the near-term outlook is characterized by divergent risks.

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Upside risks could lift already-robust growth in the United States in the short run, whereas risks in other countries are on the downside amid elevated policy uncertainty.”“Policy-generated disruptions to the ongoing disinflation process could interrupt the pivot to easing monetary policy, with implications for fiscal sustainability and financial stability.

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Managing these risks requires a keen policy focus on balancing trade-offs between inflation and real activity, rebuilding buffers, and lifting medium-term growth prospects through stepped-up structural reforms as well as stronger multilateral rules and cooperation”, the outlook added.

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