In its latest report, the International Monetary Fund (IMF) has projected a slight acceleration in global economic growth along with a continued decline in inflation rates for the current year. However, the organization has expressed concern over uncertainties linked to the impending policies of President-elect Donald Trump, which include significant tax reductions, tariffs on imported goods, regulatory rollbacks on businesses, and the deportation of undocumented immigrants in the U.S.
The IMF anticipates a global economic growth rate of 3.3% for this year and the next, marking a modest uptick from 3.2% recorded in 2024. This growth, while steady, does not match the pre-2020 averages of 3.7% per annum observed between 2000 and 2019. The sluggish pace of recovery is attributed to the lasting impact of major global disruptions, notably the COVID-19 pandemic and the conflict in Ukraine.
As a major international financial institution supporting 191 nations, the IMF aims to foster economic advancement, bolster financial stability, and mitigate poverty worldwide.
Regarding inflation, the IMF predicts a decrease from 5.7% in 2024 to 4.2% this year, with an expected further drop to 3.5% in 2026. However, Pierre-Olivier Gourinchas, the IMF’s chief economist, cautioned that Trump’s proposed policies could lead to an initial rise in inflation. He noted that aggressive tax cuts might overstimulate the U.S. economy, while significant tariffs on imports could elevate prices and negatively impact exporting nations globally. Furthermore, a mass exodus of undocumented workers from jobs like hospitality and construction could exacerbate labor shortages, thereby inflating operational costs and hampering growth.
Gourinchas also recognized that deregulating businesses might enhance potential growth in the medium term by eliminating bureaucratic barriers and fostering innovation. However, he warned that overzealous deregulation could weaken important financial protections, increasing economic vulnerability and potentially leading to erratic boom-bust cycles.
With a robust economic landscape, the U.S. is set to experience a solid growth rate of 2.7% this year, a notable revision from the previously forecasted 2.2% in October. The country’s economy, recognized as the largest in the world, has shown resilience against elevated interest rates introduced by the Federal Reserve to combat inflation. Factors contributing to this stability include a vigorous job market that bolsters consumer spending confidence, productivity gains, and an influx of immigrants helping alleviate labor shortages.
Contrasting sharply, advanced economies across Europe are struggling. The IMF predicts that the 20 nations using the euro will see growth of only 1% this year, which represents a slight improvement from the 0.8% growth anticipated for 2024 but still down from earlier estimates of 1.2%. Gourinchas pointed out several challenges these economies face, such as sluggish manufacturing growth, waning consumer confidence, and ongoing energy price volatility stemming from geopolitical tensions related to Russia.
In China, the world’s second-largest economy, growth is expected to slow further, declining from 4.8% last year to 4.6% in 2025 and 4.5% in 2026. The downturn has been largely influenced by a decline in the housing market, which has eroded consumer confidence. Gourinchas expressed concerns that without proactive government measures — including interest rate cuts, increased expenditure, or tax incentives — China risks sinking into a damaging cycle of debt-deflation stagnation, wherein deflation discourages consumer spending and complicates debt repayments for borrowers.
These forecasts by the IMF surfaced shortly after the World Bank, another prominent financial organization, projected global growth at 2.7% for 2025 and 2026, aligning with predictions for the preceding years. The World Bank, which focuses on aiding impoverished nations through loans and grants, has emphasized that such growth rates are insufficient for effectively combating poverty in lower-income regions. Due to a focus on the faster expansion of developing nations, the IMF typically estimates higher global growth compared to the World Bank.
