The International Monetary Fund (IMF) has updated its global growth predictions, now forecasting rates of 3.0% for 2025 and 3.1% for 2026. This is an improvement over its April forecast, with the 2025 projection up by 0.2 percentage points and the 2026 outlook up by 0.1 percentage points.

According to Pierre-Olivier Gourinchas, the IMF’s Chief Economist, the improved forecast is due to several factors: stronger-than-expected early economic activity, lower tariffs, more relaxed financial conditions, a weaker U.S. dollar, and increased government spending in some regions. Despite the positive revision, Gourinchas noted that the projections are still lower than what was predicted before April, suggesting that ongoing trade tensions are still harming the global economy.

Global inflation is expected to continue dropping to 4.2% in 2025 and 3.6% in 2026.

Gourinchas also pointed out that the economic outlook still faces significant risks, including:

• Renewed protectionism or a failure in trade talks, which could hurt global growth and increase inflation.

• Ongoing uncertainty that might deter investment.

• Geopolitical tensions and fiscal vulnerabilities.

• A potential abrupt tightening of financial conditions.

To address these challenges, the IMF advises policymakers to focus on several key areas:

• Reducing policy uncertainty, especially in trade, by establishing clear and predictable rules.

• Restoring fiscal buffers to strengthen economies.

• Maintaining price and financial stability through independent central banks.

• Allowing for flexible exchange rates.

• Implementing structural reforms to support long-term growth.