IMF upgrades growth projections, but risks still 'tilted to the downside'

(Sharecast News) - The International Monetary Fund (IMF) has raised its projections for economic growth in 2025 and 2026 on the back of easing trade uncertainty, as a weaker US dollar has mitigated the impact of Donald Trump's tariff barrage. The global economy is now expected to expand by 3.0% this year and by 3.1% in 2026, compared with the IMF's April forecasts of 2.8% and 3.0%, respectively. That's down from 3.3% growth registered in 2024.

The financial institution said the upgrade reflects stronger-than-expected international trade in the first quarter, as buyers front-loaded international orders before US trade tariffs took effect in April.

Meanwhile, a lower-than-predicted average effective US tariff rate has helped the outlook, when compared to the more extreme threats made by Trump at the time of the last forecast.

An improvement in financial conditions - mainly as a result of a depreciating US dollar - and "fiscal expansion in some major jurisdictions" have also prompted the upwards revision.

As expected in April's projections, headline inflation is predicted to ease to 4.2% in 2025 and 3.6% in 2026, though will remain above target in the US.

However, despite the GDP upgrade, the IMF said that risks to the outlook "are tilted to the downside".

"Downside risks from potentially higher tariffs, elevated uncertainty, and geopolitical tensions persist," the report said. "Restoring confidence, predictability, and sustainability remains a key policy priority."