The International Monetary Fund announced an increased forecast for global growth in 2025 by one-tenth of a percentage point, noting robust growth in the U.S. It projected a global growth rate of 3.3% for both 2025 and 2026, anticipating a decline in global headline inflation. However, cautioning against protectionist measures, the IMF emphasized the importance of avoiding actions that could potentially harm trade. IMF chief economist Pierre-Olivier Gourinchas underscored the negative impact of such policies, stating they often lead to mutual losses.
Ahead of the U.S. presidential inauguration, concerns were raised about potential protectionist policies proposed by President-elect Donald Trump. The IMF warned that escalating protectionism could lead to trade tensions, reduced investment, and supply chain disruptions, ultimately affecting global growth. While acknowledging the uncertainty surrounding future U.S. policies, the IMF stressed the significance of closely monitoring potential repercussions.
The IMF highlighted the potential consequences of deregulation, particularly in the financial sector, cautioning that excessive deregulation could result in volatile economic fluctuations. Mentioning the need for oversight in the realm of digital currencies to prevent systemic risks, Gourinchas emphasized the importance of maintaining stability in the payment system. Concerns were also raised about the impact of tariffs and immigration restrictions, potentially leading to higher costs for businesses.
Addressing the implications of U.S. monetary policy changes, the IMF outlined potential effects on economic activity and financial conditions. While looser monetary policies in the U.S. could initially stimulate economic growth, they might necessitate future adjustments that could weaken the global safe asset status of U.S. Treasuries. Gourinchas highlighted market uncertainties regarding future policies and the potential impact on long-term yields.
The IMF adjusted its growth forecasts for various regions, raising expectations for the U.S. and China while reducing projections for the euro area and the Middle East. Structural factors were cited as reasons for the growth discrepancies between the U.S. and Europe, emphasizing the need for addressing underlying issues to bridge the gap. The IMF stressed the importance of shifting towards domestic demand to drive growth and reduce reliance on external demand for sustainable development.
In conclusion, the IMF's latest economic outlook signals a mix of positive growth prospects tempered with warnings about protectionism, deregulation, and policy uncertainties that could impact global economic stability.