IMF upgrades outlook for global growth
A. SREENIVASA REDDY (ABU DHABI)The International Monetary Fund (IMF) has revised its projections for the global economy and major economies, offering a cautiously optimistic outlook amidst persistent global uncertainties. In the July 2025 update of the World Economic Outlook (WEO), the IMF forecasts the global economy to grow by 3% in 2025 and 3.1% in 2026—upward revisions of 0.2 and 0.1 percentage points, respectively, from the April 2025 estimates.The IMF attributed the modest upgrade to 'lower average effective US tariff rates than announced in April, an improvement in financial conditions, including due to a weaker US dollar, and fiscal expansion in some major jurisdictions.'Global headline inflation is expected to fall to 4.2% in 2025 and further to 3.6% in 2026. While this path broadly aligns with previous forecasts, the Fund warned of diverging inflation trends. Inflation in the United States is likely to remain above target, while it is projected to ease more sharply in other large economies.The IMF underscored that global growth remains vulnerable to geopolitical tensions, high fiscal deficits, and unresolved trade frictions. 'If deadlines for additional tariffs expire without progress, it could have serious negative effects for the economy,' the report cautioned. On the upside, it noted, 'Global growth could be lifted if trade negotiations lead to a predictable framework and to a decline in tariffs.'The IMF called for policies that would 'bring confidence, predictability, and sustainability by calming tensions, preserving price and financial stability.'The US economy is forecast to grow by 1.9% in 2025 and 2.0% in 2026, representing upward revisions of 0.1 and 0.3 percentage points, respectively, from the April 2025 forecasts.For the Eurozone area, growth is projected at 1.0% in 2025 and 1.2% in 2026. The 2025 estimate is 0.2 percentage points higher than in April, while the 2026 projection remains unchanged.China's economy is expected to expand by 4.8% in 2025 and 4.2% in 2026, up by 0.8 and 0.2 percentage points, respectively, compared to the previous forecast.India remains one of the strongest performers globally, with projected growth of 6.4% for both 2025 and 2026. These figures are 0.2 and 0.1 percentage points higher than the April forecasts.In the Middle East and Central Asia region, GDP is forecast to grow by 3.4% in 2025 and 3.5% in 2026. The 2025 figure is 0.4 percentage points higher than in April, while the 2026 outlook is unchanged.
Saudi Arabia is projected to grow by 3.6% in 2025 and 3.9% in 2026, which is 0.6 and 0.2 percentage points above the April forecast, respectively.
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