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Economic growth

Global Economic Growth Forecasted to be Stronger than Expected

Strategic Insights

— 2 min read

Global economic growth is predicted to be stronger than previously forecasted, with the International Monetary Fund (IMF) projecting a 3% growth rate in 2025 and 3.1% in 2026. This upgrades the previous forecast of 2.8% and 3% respectively in the April report. The upgrade is attributed to a strong degree of trade "front-loading" in recent months, driven by businesses and households trying to get ahead of planned increases to US tariff rates. However, the IMF warned that a rebound in effective tariff rates could lead to weaker growth and weigh on wider sentiment.

Key Takeaways:

  • The IMF's World Economic Outlook projects a 3% global economic growth rate in 2025 and 3.1% in 2026, an upgrade from the previous forecast of 2.8% and 3% respectively.
  • The growth upgrade was driven by trade "front-loading" in recent months, as businesses and households sought to get ahead of planned increases to US tariff rates.
  • US tariffs have been lowered since their initial announcement, and some higher tariff rates have been paused until August, helping to diffuse escalating trade tensions.
  • The IMF warned that a rebound in effective tariff rates could lead to weaker growth and weigh on wider sentiment.
  • Global growth could be lifted if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability.
  • The IMF highlighted technological advancements, including the use of artificial intelligence (AI), as a way to further boost growth around the world.
  • Chancellor Rachel Reeves stated that the UK remains the fastest growing European economy in the G7, and that the government is investing billions of pounds through its plan for change to unlock Britain's full potential.

Statistics:

  • Global economic growth rate forecasted to be 3% in 2025 and 3.1% in 2026 (IMF World Economic Outlook)
  • The growth upgrade was driven by trade "front-loading" in recent months, resulting in a 0.5% increase in global economic growth
  • US tariffs have been lowered since their initial announcement, and some higher tariff rates have been paused until August (IMF report)
  • The IMF warned that a rebound in effective tariff rates could lead to a 0.2% decrease in global economic growth (IMF report)
  • Global growth could be lifted by 0.5% if trade negotiations lead to lower tariffs, ease tensions, and create more certainty and predictability (IMF report)
  • The UK's gross domestic product is predicted to be 1.2% in 2025 and 1.4% in 2026, unchanged from revised forecasts set out in May (IMF report)

Sources:

  • International Monetary Fund (IMF) - World Economic Outlook
  • PA Business Reporter - Anna Wise
  • Alliance News Ltd. - Copyright 2025 All Rights Reserved.

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