IMF Projects Steady Global Growth and Continued Disinflation in 2025

The International Monetary Fund (IMF) is expected to project steady global growth and continuing disinflation in its updated World Economic Outlook, set for release on January 17. IMF Managing Director Kristalina Georgieva shared her insights with reporters on Friday, noting that while global growth remains on track, challenges stemming from trade policy uncertainties and high long-term interest rates continue to pose risks to the global economy.

U.S. Economy Surpassing Expectations

Georgieva highlighted that the U.S. economy was performing better than anticipated. However, she pointed out that uncertainty surrounding the trade policies of President-elect Donald Trump’s administration was creating headwinds for the global economy. This uncertainty, she said, was contributing to higher long-term interest rates and complicating future economic planning.
With inflation moving closer to the U.S. Federal Reserve's target, Georgieva stated that the Fed could afford to take a wait-and-see approach regarding further interest rate cuts. Overall, she indicated that interest rates were expected to remain "somewhat higher for quite some time."

Divergent Regional Growth Trends and Potential Risks
The IMF’s updated global outlook comes just days before Trump assumes office. While Georgieva did not reveal specific projections, her comments provide early insight into the IMF's evolving economic perspective. The IMF’s previous forecasts, released in October, had indicated a more optimistic outlook for the U.S., Brazil, and Britain, but noted weaker growth in China, Japan, and the eurozone due to risks from trade tensions, armed conflicts, and tight monetary policies.

In particular, Georgieva expressed concerns about the potential for global growth to dip further in the medium term, forecasting a slowdown to 3.1% in five years—well below pre-pandemic growth trends. The IMF also anticipated growth to stall in the European Union, weaken slightly in India, and face higher inflation in Brazil.

Challenges in China and Lower-Income Countries
Georgieva noted that China, the world’s second-largest economy, was experiencing deflationary pressures and struggling with ongoing challenges in domestic demand. Meanwhile, lower-income countries, despite reform efforts, remain vulnerable to external shocks, which could significantly affect their economies.

Impact of Higher Interest Rates and Strong U.S. Dollar
The IMF chief pointed out that while the global economy had not fallen into recession despite higher interest rates, inflationary trends varied significantly across regions. She emphasized that central banks must carefully monitor local data to tailor their policies accordingly. Georgieva also warned that a stronger U.S. dollar could increase funding costs for emerging markets and particularly for low-income countries, further complicating their economic recovery.

Need for Fiscal Discipline and Long-Term Reforms
Looking ahead, Georgieva stressed that most countries need to reduce fiscal spending after the high outlays incurred during the COVID-19 pandemic. To ensure durable growth, she urged nations to implement reforms aimed at boosting productivity and economic resilience, while balancing their fiscal positions. “The world cannot borrow its way out of its problems,” she said. “Countries must grow their way out.” However, she noted that medium-term global growth prospects remain among the lowest seen in decades, underscoring the urgent need for strategic economic reforms.