IMF: Global Economy Dims, Risks Grow

The International Monetary Fund (IMF) released its latest World Economic Outlook (WEO) on October 14, 2025, titled "World Economic Outlook, October 2025: Global Economy in Flux, Prospects Remain Dim", revealing a global economy in flux with persistently dim prospects despite modest upward revisions to growth forecasts. The report, published from Washington D.C., highlights the ongoing adaptation to new policy measures and warns of significant downside risks.

Global growth projections have been modestly revised upwards for 2025 to 3.2% from 3.0% in July, yet remain subdued compared to pre-policy-shift expectations. The IMF projects a slowdown from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026.

Inflation is generally expected to continue declining globally, but the United States remains an outlier with inflation above target and risks tilted to the upside. Core inflation has notably risen in the US, while it is subdued or stabilizing above central bank targets in other regions.

The global economy is currently adjusting to a landscape reshaped by new policy measures, including tempered tariffs due to subsequent deals. Temporary factors, such as front-loading of trade and investment in anticipation of tariffs, supported activity in early 2025 but are now fading.

The overall environment faces significant downside risks, including prolonged uncertainty, increased protectionism, and potential labor supply shocks. Fiscal vulnerabilities, financial market corrections, and the erosion of institutional credibility also threaten stability, according to the IMF. [Source, 2, 4, 6]

Policymakers are urged to restore confidence through credible and transparent policies, pair trade diplomacy with macroeconomic adjustment, and rebuild fiscal buffers. The IMF also stressed the importance of preserving central bank independence and redoubling structural reform efforts.

IMF Chief Economist Pierre-Olivier Gourinchas noted that while the "tariff shock" has been smaller than initially feared, it still contributes to dimming growth prospects. He emphasized that the global economy's "unexpected resilience" is largely due to temporary factors.

• The IMF's October 2025 WEO acknowledges an "unexpected resilience" in the global economy, particularly in the face of US tariffs. This resilience, however, is attributed to temporary factors like front-loading of trade and investment, and new trade deals, rather than fundamental economic strength. The full impact of protectionist measures is still unfolding.
• The projected global growth deceleration from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026 indicates a persistent slowdown. Advanced economies are expected to grow around 1.5%, while emerging markets and developing economies are forecast to grow just above 4%. IMF Managing Director Kristalina Georgieva characterized this as a "fragile recovery."
• While global inflation is generally declining, the US faces persistent above-target inflation with upside risks, partly due to rising core inflation. In contrast, China experienced easing deflation, and Eurozone core inflation was revised upwards to 2.4% in September. The UK is projected to have the highest inflation in the G7 for 2025.
• The report highlights that trade policy uncertainty remains elevated, despite some tempering of higher tariffs through subsequent deals. The reordering of policy priorities in the United States and adaptive measures by other economies have reshaped the global economic landscape. The adverse effects of protectionist measures are increasingly evident.
• Beyond trade, the IMF identifies several critical downside risks. These include labor supply shocks, partly due to declining net migration, and fiscal vulnerabilities across many countries. The potential for financial market corrections, possibly linked to an AI technology bubble, and the erosion of institutional credibility, particularly central bank independence, are also significant concerns.
• To navigate these challenges, the IMF urges policymakers to prioritize restoring confidence and predictability. Key recommendations include rebuilding fiscal buffers, preserving central bank independence, and redoubling efforts on structural reforms. The Fund also advocates for maintaining rules-based trade systems and fostering international cooperation to counteract economic fragmentation.
• The report also touches upon social and development implications, noting sizable cuts in development aid and more restrictive immigration stances. Official development assistance dropped by 9% in 2024, with a similar decline expected in 2025, disproportionately affecting low-income developing countries. This exacerbates challenges for vulnerable economies.
• The US economy is projected to expand by 2% in 2025, a modest upgrade from earlier forecasts, partly due to tax incentives and AI-driven investment. However, the IMF notes that hiring has nearly halted, reflecting a cautious approach by firms amidst tariff uncertainty. The US faces the challenge of above-target inflation and potential labor supply constraints.