20th January 2025 4:12:05 PM
2 mins readThe January 2025 World Economic Outlook Update by the International Monetary Fund, has it that global growth is projected to remain steady but underwhelming in 2025.
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With growth forecasts of 3.3% for both 2025 and 2026, the projections fall short of the historical average of 3.7% (2000–2019) and are largely consistent with October's outlook.
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However, the report highlights that this global stability masks varying growth trajectories across different economies, presenting a fragile global growth scenario.
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In advanced economies, growth projections have been revised in contrasting directions.
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The IMF reports that in the United States, strong underlying demand continues, driven by significant wealth effects, a more relaxed monetary policy, and favorable financial conditions.
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Growth is projected to reach 2.7% in 2025, 0.5 percentage points higher than previously forecasted in October. This increase is partly due to momentum from 2024, along with a strong labor market and rising investments. However, growth is expected to slow to its potential level in 2026.
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Eurozone
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In the euro area, economic growth is expected to improve, but it will happen more slowly than originally thought in October 2024. Ongoing political and global tensions are still affecting confidence and slowing down progress.
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“Weaker-than-expected momentum at the end of 2024, especially in manufacturing, and heightened political and policy uncertainty explain a downward revision of 0.2 percentage point to 1.0% in 2025. In 2026, growth is set to rise to 1.4%, helped by stronger domestic demand, as financial conditions loosen, confidence improves, and uncertainty recedes somewhat”, it said.
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Other Advanced Economies
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In other developed economies, the IMF says that two opposite factors are balancing out the growth predictions.
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On one side, improving incomes are likely to boost spending. On the other side, challenges in trade and growing uncertainty around trade policies are expected to hold back investment.
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Emerging Markets/Developing Economies
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In developing countries, the IMF says that growth in 2025 and 2026 will likely stay similar to what it was in 2024.
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For China, growth in 2025 has been slightly increased to 4.6%, mainly because of positive effects from 2024 and new government policies that are helping balance out challenges like trade issues and a slow property market.
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In 2026, growth is expected to stay around 4.5% as trade problems ease and a higher retirement age helps slow down the drop in the working population.
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In sub-Saharan Africa, growth is expected to improve in 2025, while in emerging and developing Europe, it’s forecasted to slow down.
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