IMF Raises Global Economic Growth Forecast to 3% for 2025

On July 29, the International Monetary Fund (IMF) raised its 2025 global economic growth forecast to 3.0%, a 0.2 percentage point increase from its previous forecast released in April. While perceptions of a sharp economic slowdown caused by the Trump administration’s high tariffs are fading, the projected growth rate in 2025 will still be lower than the 3.3% projected for 2024.

The IMF reassesses its economic forecasts quarterly. In April, following the US announcement of reciprocal tariffs, the IMF significantly lowered its growth forecast by 0.5 percentage points.

The main reason for the easing of pessimism is that the escalating retaliatory tariffs between China and the US, which had exceeded 100%, subsided after the May agreement. The effective US tariff rate, which was projected at 24.4% in April, was reduced to 17.3%. Businesses are also adopting more flexible measures to cope with tariffs, such as frontloading imports.

The weakening of the US dollar was also unexpected. While tariff increases were initially expected to strengthen the US dollar, the US dollar index has fallen 10% since the beginning of the year. This has provided emerging economies with dollar-denominated debt with more policy leeway.

The renminbi, which is linked to the US dollar, has also depreciated against other major currencies, allowing China to offset its decline in exports to the US by exporting to other regions. The IMF raised its forecast for China’s economic growth by 0.8 percentage points to 4.8%.

The US economic growth forecast is now 1.9%, up 0.1 percentage points. Due to the passage of the “Big, Big, Big” bill (OBBB) in July, the IMF also raised its 2026 forecast by 0.3 percentage points to 2.0%. The IMF noted that the bill will increase the US fiscal deficit by approximately 1.5 percentage points as a percentage of GDP in 2026, with tariff revenues only offsetting half of that.

Based on actual data from January to March 2025, the IMF raised its forecast for Japan’s economic growth by 0.1 percentage points to 0.7%. The eurozone’s growth forecast was also slightly raised. The tariff agreements announced in late July between the US government and Japan and the European Union are not reflected in this estimate.

The IMF believes that the current global economic recovery remains fragile amid ongoing uncertainty. The US government will implement new tariff rates on August 1st. Despite recent progress in some tariff negotiations, rising protectionism and an uncertain outlook are likely to dampen business activity.