IMF Sees Global Growth Moderating To 3.2 Pct In 2025, Calls For Policy Prudence

KUALA LUMPUR, Oct 14 (Bernama) -- Global growth is projected to slow to 3.1 per cent in 2026, against 3.2 per cent this year from 3.3 per cent in 2024, said the International Monetary Fund (IMF).

In a statement following its World Economic Outlook (WEO), October 2025 released in Washington DC today, it said advanced economies are projected to grow at around 1.5 per cent and emerging markets and developing economies at just above four per cent.

“The global economy is adjusting to a landscape reshaped by new policy measures. Some extremes of higher tariffs were tempered, thanks to subsequent deals and resets.

“But the overall environment remains volatile, and temporary factors that supported activity in the first half of 2025, such as front-loading, are fading,” it said.

This has resulted in global growth projections being revised upward relative to the April 2025 WEO but continues to mark a downward revision relative to the pre-policy-shift forecasts, it said.

The IMF said in its executive summary that the global growth outlook has improved relative to the July WEO update, with the slowdown reflecting headwinds from uncertainty and protectionism, even though the tariff shock is smaller than originally announced.

On an end-of-year basis, global growth is projected to slow down to 2.6 per cent in 2025 from 3.6 per cent in 2024.

Advanced economies are forecast to grow about 1.5 per cent in 2025-26, with the US slowing to 2.0 per cent. 

"Emerging market and developing economies are projected to moderate to just above 4.0 per cent," it said.

It further said inflation is expected to decline to 4.2 per cent globally in 2025 and to 3.7 per cent in 2026, with notable variation: above-target inflation in the US, with risks tilted to the upside and subdued inflation in much of the rest of the world. 

World trade volume is forecast to grow at an average rate of 2.9 per cent in 2025-26, boosted by front-loading in 2025 yet still much slower than the 3.5 per cent growth rate in 2024, with persistent trade fragmentation limiting gains.

IMF said risks to the outlook remain tilted to the downside, as they were in previous WEO reports, with prolonged uncertainty, more protectionism, and labour supply shocks could reduce growth. 

Fiscal vulnerabilities, potential financial market corrections, and erosion of institutions could threaten stability.

Nonetheless, policymakers are urged to restore confidence through credible, transparent, and sustainable policies. 

Trade diplomacy should be paired with macroeconomic adjustment, while fiscal buffers should be rebuilt, central bank independence should be preserved, and efforts on structural reforms should be redoubled, the IMF added. 

-- BERNAMA