IMF Chief Predicts Steady Global Growth and Disinflation in 2025

The International Monetary Fund (IMF) expects steady global economic growth and continued disinflation in 2025, according to Managing Director Kristalina Georgieva. The IMF will release its updated World Economic Outlook on January 17, days before the inauguration of US President-elect Donald Trump.

Key Highlights:

1. US Economic Outlook
   • The US economy is performing better than anticipated, with inflation nearing the Federal Reserve’s target and the labor market remaining stable.
   • Georgieva noted uncertainty surrounding the trade policies of the incoming Trump administration, which could increase headwinds for the global economy and push long-term interest rates higher.
2. Global Growth Trends
   • The IMF’s October projections indicated 2024 global growth at 3.2%, with a slight reduction in the 2025 forecast to 3.1%, citing risks such as trade tensions, armed conflicts, and tight monetary policies.
   • Medium-term global growth is expected to stabilize below pre-pandemic trends.
3. Regional Divergences
   • European Union: Growth is projected to stall.
   • India: A slight weakening in growth is anticipated.
   • China: Facing deflationary pressures and subdued domestic demand.
   • Brazil: Experiencing slightly higher inflation.
   • Lower-Income Countries: Vulnerable to additional economic shocks despite reform efforts.
4. Inflation and Interest Rates
   • Central banks are closely monitoring divergent inflation trends worldwide.
   • Long-term interest rates remain unusually high despite declines in short-term rates, a rare trend in recent economic history.
5. Fiscal Challenges and Growth
   • Countries are encouraged to reduce fiscal spending after pandemic-era expenditures and focus on reforms to drive sustainable growth.
   • “Countries cannot borrow their way out. They can only grow out of this problem,” Georgieva emphasized, noting that global medium-term growth prospects are at their weakest in decades.
6. Emerging Markets
   • A strong US dollar could increase funding costs for emerging and low-income countries, further challenging their economic stability.

Looking Ahead

Georgieva highlighted the resilience of the global economy, which has avoided recession despite higher interest rates aimed at combating inflation. However, she urged governments to address fiscal challenges and invest in reforms to support long-term growth.

The IMF’s full updated outlook will provide further insights when it is released on January 17.