WORLD ECONOMIC OUTLOOK UPDATE:TENUOUS RESILIENCE AMID UNCERTAINTY

WORLD ECONOMIC OUTLOOK 

According to IMF 's World Economic Outlook July 2025 update amidst tenuous resilience and persistent uncertainty the global  growth is projected  to  be 3.0% for 2025 and 3.1 %  for  2026 which is slightly higher to the extent of 0.2 % for 2025 and 0.1 % for 2026 as against that projected in April 2025 World Economic Outlook.Since April 2025 uncertainties not only persisted but also elevated particularly in global trade and tarrifs.However on May  12th China and USA agreed to lower for 90 days tarrifs(until August 12)  that had resulted from post April 2 escalation. The  US  current pause on higher tarrifs for most of its trading partners is set to expire in August .Global growth in the first quarter of 2025 was 0.3% above that  predicted in April WEO .Even though international trade and investment activities increased but private consumption subdued across countries. While US GDP decreased by 0.5% consumer spending rose by only 0.5%.But imports and business investment surged especially in information technology related services in USA. 

PERFORMANCE OF INDIVIDUAL COUNTRIES 

The WEO July update projected global GDP growth of  3.0 and 3.1 for the years 2025 and 2026.While advanced economies are expected to grow 1.5% and 1.6 % respectively for years 2025 and 2026, Emerging Markets and Developing economies continued to do better performance with 4.1%and 4.0 % respectively. While EURO area showed 1.0% and  1 .2 % whereas   USA is expected to  grow 1.9% in 2025 and 2.0% for 2026. Projections for China was 4.8% for 2025  and 4.2 for 2026.For Germany 0.1 and 0.9,Japan 0.6 and 1.0,UK 1.2 and 1.4,France 0.6  and  1.0  respectively. As far as Russia is concerned country  witnessed sharp decline in growth  from 4.1% in 2023 4.3 % in 2024 to just 0.9% in 2025 and 1.0 in 2026.India as global leader of growth showed highest projections of  6.4% growth for both 2025 and 2026.It may be noted here  that while IMF projected 6.4 % GDP growth for India it is lower than RBI's projection of 6.5% whereas Economic Survey projected( 6.3- 6.8%) for the financial year 2025-26.On the other hand ADB estimated 6.5% growth for India .The relatively stellar performance of India can be attributed  to " Stronger than expected front loading in anticipation of higher tarrifs, lower average effective US tariff rates than announced in April,Improvement in financial conditions including  a weakened  US $ ( around 8% depreciation since January) and fiscal expansion in many countries. Strikingly very low global head line inflation is expected to fall to 4.2 %  in 2025  and 3,6% in 2026. However inflationary forecast  prediction will remain above target in US and other subdued economies 

CONCLUSION 

Bilateral negotiations can defuse trade tensions and increase trade and investments. Adopting a pragmatic Cooperative approach towards policies could reduce negative spillovers among trading partners. Restoring fiscal space and ensuring sustainable public debt is crucial which requires credible medium term fiscal consolidation with growrh friendly adjustments including the focus on rebuilding buffers.Infact  international cooperation across various policy areas comprising of trade, industrial policies tariff and taxation can minimize cross country spillovers and support vulnerable economies.  According to IMF lifting medium growth prospects is the only sustainable way to ease macro economic problems. Structural reforms in different areas like labour markets, education, health, regulation and competition to boost productivity and job creation fostering technological development including digitalisation and adoption of artificial Intelligence AI etc are  bound to enhance productivity and potential growth. However the threat of unjustifiable tariffs from USA is still looming across many countries including India unless we are able to chalk out a feasible free trade agreement with USA. Recent depreciation of US dollar and growing dominance of BRICS may lead to further provocation and sharpening  and use of tarrif  weapons against countries sometimes irrationally which is likely to impact India's growth partially. 

  In the absence of conclusion of a  Indo USA free trade agreement,today  President Donald Trump has imposed 25% tarrif on Indian goods exported to USA, and penalty on goods imported by India from Russia (mainly oil and defense equipments )which will come effective from August 1st.The outcome of Trump's trade policy is unpredictable. The proposed US tariff rates are India 25% ,China 30%,Vietnam 20 %,Indonesia 19% Philippines 19%,Japan 15 % ,EU 15 % and UK 10 %.Evolving scenario is likely to hit our exports of marine products, textiles and garments, leather, gems and jewelry exports from India to USA. Countries like Vietnam,Indonesia and Bangladesh may get some advantage to export to US due to tariff differences. In nutshell the tarrif and penalty proposed by Donald Trump is very much  unethical and highly discriminatory in nature and is likely to impact negatively on our GDP growth.