Global growth: Divergent and Uncertain
January 2025
Growth on Divergent Paths Amidst Elevated policy Uncertainty
The global economic landscape is presenting a picture of divergence and uncertainty. The International Monetary Fund’s (IMF) World Economic Outlook Update, released in January 2025, paints a complex picture of a world grappling wiht a multitude of challenges, from persistent inflation to geopolitical tensions.
The report highlights the widening gap in growth trajectories between advanced economies and emerging markets.
While some regions are witnessing a modest recovery, others continue to face headwinds, creating a landscape of uneven progress. policy uncertainty,a persistent theme in recent years,further complicates the outlook, making it challenging for businesses and governments to plan for the future.
The IMF report emphasizes the need for carefully calibrated policy responses to address these challenges and foster a more stable and inclusive global recovery.
Global Economic Outlook: Cautious Growth Amidst Uncertainties
The global economy is projected to grow at a modest pace, with a forecast of 3.3% for both 2025 and 2026. This rate falls below the past average of 3.7% observed between 2000 and 2019. While the outlook for 2025 remains largely unchanged from the previous October World Economic Outlook, this stability masks a complex reality. An upward revision in the U.S.economy is being offset by downward revisions in other leading economies, highlighting the uneven nature of the global recovery.
Inflation, a major concern for policymakers worldwide, is expected to gradually subside. Global headline inflation is projected to decline to 4.2% in 2025 and further to 3.5% in 2026. Though, this cooling trend is anticipated to be more pronounced in advanced economies compared to emerging market and developing economies.
Looking ahead, the economic landscape presents a mixed picture. While there are potential upside risks for the U.S., other nations face a more challenging outlook, weighed down by heightened policy uncertainty. Experts warn that disruptions to the ongoing disinflation process, perhaps sparked by policy missteps, coudl hinder efforts to ease monetary policy. This, in turn, could jeopardize fiscal sustainability and financial stability.
Effectively navigating these complexities requires a deft policy response. Policymakers must strike a delicate balance between managing inflation and supporting real economic activity. Additionally, rebuilding crucial economic buffers and implementing structural reforms to boost long-term growth prospects are paramount. Strengthening multilateral rules and cooperation can also play a vital role in creating a more resilient and stable global economy.
