The International Monetary Fund (IMF) is expecting steady global economic growth and a continued decline in inflation in 2025, according to remarks made by IMF Managing Director Kristalina Georgieva on January 10. The IMF’s updated World Economic Outlook, to be released on January 17, will provide more detailed projections.
Georgieva highlighted that the U.S. economy was performing “quite a bit better” than expected, noting that the country’s economic recovery was supported by a stable labor market and inflation nearing the Federal Reserve’s target. This, she suggested, could allow the U.S. central bank to pause further interest rate cuts, with rates likely to remain “somewhat higher for quite some time.” However, she also pointed out that trade policy uncertainty under President-elect Donald Trump’s administration posed significant risks to the global economy and could drive long-term interest rates higher.
The IMF’s previous global growth forecast, issued in October, pegged worldwide growth at 3.2% for 2024, with adjustments for different countries. While the IMF raised growth projections for the U.S., Brazil, and the U.K., it lowered them for China, Japan, and the euro zone, citing risks like potential trade wars, geopolitical conflicts, and tight monetary policy. The organization also revised its 2025 global growth forecast down slightly to 3.1%, warning that medium-term global growth would fall below pre-pandemic trends.
Georgieva noted that the uncertainty surrounding U.S. trade policies was contributing to global headwinds, especially for countries that are heavily integrated into global supply chains, as well as medium-sized economies, particularly in Asia. She described the current economic landscape as “unusual,” with long-term interest rates rising even as short-term rates were declining—an anomaly not seen in recent history.
In terms of regional trends, the IMF forecasted weaker growth in several areas. The European Union was expected to see economic growth stall, while India’s growth was predicted to slow slightly. Brazil, meanwhile, was grappling with higher inflation. In China, the IMF identified deflationary pressures and weak domestic demand as major challenges for the world’s second-largest economy.
For lower-income countries, Georgieva warned that any new economic shocks could have a significantly negative impact, despite ongoing reform efforts. These nations, already facing vulnerabilities, were in a precarious position if further challenges arose.
The IMF’s upcoming World Economic Outlook will provide additional insights into these forecasts and the global economic landscape as nations grapple with evolving challenges, including the shifting policies of major economies like the U.S. and the ongoing uncertainties in key markets.
BY – KARTIK
