IMF OUTLOOK :GLOBAL ECONOMY IN FLUX ,PROSPRCTS REMAIN DIM

BACKGROUND OF OCTOBER 2025 OUTLOOK

According to IMF's World Economic Outlook October 2025 in April when US announced sizable tariff against most of it's trading partners, given the complexity and fluidity of the situation April 2025 World Economic Outlook offered a range of downward  revision of estimates in global growth from modest to significant depending on the impact of severity of trade shock. After six months the  negative impact of  global economic growth became modest due to the agility of private sector which front loaded imports and also reorganized supply chains to redirect trade flows. The global economy started showing  moderate slow down in the first half of  2025 and further marked robust activity. Inflation In Asian economies was subdued while it remained steady in USA. This apparent resilience is largely applicable to temporary factors like front loading of trade and investment and inventory management strategies. The global growth is projected to slow down marginally from 3.3% in 2024 to3.2% in 2025 and to 3.1% in 2026.Advanced economies are projected to grow with 1.5% in 2025-26 with US slowing to 2.0% emerging market and developing economies projected to grow above 4.0%..On the otherhand inflation is expected to decline to 4.2 % globally in 2025 and to 3.7% in 2026..Similarly World Trade  volume is forecast to grow at an average rate of 2.9% in 2025-26  due to front loading in 2025 much slower than the 3.5% growth rate in 2024- 26 with persistent trade fragmentation leading to limited gains in trade.

Risks to  World Economic Outlook remained downside as in previous reports  due to - prolonged policy uncertainty that could dampen both consumption and investment. Escalation of protectionist measures including non tariff barriers could suppress investment,disrupt global supply chains and adversely affect productivity growth. Unexpected shocks to labour supply especially from restrictive immigration policies could reduce growth, especially in economies facing ageing population and skill shortages. Moreover fiscal vulnerabilities and financial markets fragiliities may result in rising borrowing costs and increased risks to soveriegns.Abrupt repricing of tech stocks could trigger disappointing results on earnings and productivity gains related  to Artificial Intelligence AI  investment. Pressure on independence of key economic institutions, like Central Banks could erode hard earned policy credibility and undermine sound economic decision making including the result of reduced data reliability. While industrial policy can have a dominant role in resilience and growth, both opportunity cost and trade off involved should also be ascertained. For low  income countries mobilizing domestic resources, governance,exchange rate policies etc are very significant.

ESTIMATES AND PROJECTIONS 

As per the IMF october 2025 World Economic Outlook world output growth  which was 3.3% in 2024 is projected to be 3.2% in 2025 and 3.1% in 2026.Advanced Economies  recorded 1.8 % in 2024 and projected as 1.6 % both in 2025 and 2026,While USA recorded 2.8% in 2024 the projected growth are 2.0% for 2025 and 2,1% in 2026, as against Euro area  0.9 % only  achieved in 2024 with 1.2% projected for 2025 and 1.1 % projected for 2026 . However Spain performed better with 3.5% in 2024 , 2.9 % projected for  2025 and 2.0% in 2026.Ageing country like Japan continues to be on the low growth trajectory of 0.1 % in 2024 and  projected 1.1 for 2025 and 0.6 % for 2026.U K has recorded 1.1% for 2024 and projected 1.3% growth for  both  2025 and 2026. Canada on the otherhand has recorded 1.6% in 2024 and projected 1.2%  growth in 2025and 1.5 in 2026.Emerging Market and Developing Economies more or less continues to maintain their impressive growth performance around hovering around 4%. with 4.3 % recorded for 2024 and projected 4.2% for 2025 and 4.0% for 2026.Within EMDEs Emerging and developing Asia made exemplary performance with 5.3% in 2024 and projected 5.2% in 2025 and 4.7 % in 2026.As in the previous years India continues to be the fastest growing major economy of the globe with 6.5% growth in 2024 and projected 6.6% for 2025  and 6.2%.On the otherhand  China the second major economy has recorded 5.0% in 2024 and projected 4.8% in 2025 and 4.2% in 2026.On the contrary Russian output growth declined drastically  from 4.3% recorded in 2024 to projected 0.6% in 2025 and 1.0% in 2026.As shown above global growth is expected to slowdown from 3.3% in 2024 to 3.2% in 2005..This slowdown is due to headwinds from uncertainty and protectionism and tariff shocks. In China the hardest hit country by tariffs  growth is projected to decline only  modestly owing to sharp depreciation of the real effective exchange rate. While emerging market and developing economies have maintained 4% growth,they have benefited  from easier financial conditions.Inflation is expected to decline to 4.2% globally in 2025 and to 3.7 % in 2026.World trade volume is forecast to grow at an average rate of 2.9% in 2025-26.

WHETHER RESESILIENCE CAN BE SUSTAINED?

It has been observed that after a resilient start  global economy showed robust activity in the first half of 2025.Despite subdued inflation in Asian economies it remained steady in US. While consumer price is increasing in USA, advanced economies traditionally depending on immigration are witnessing sharp decline in net labour flows with impact on potential output.  Advanced economies are projected grow  1.5% in 2025-26 with US slowing down to 2%.EMDEs are projected to grow above 4%.While India is expected to hold its track record  of above 6% growth largely due to domestic consumption and investment,Chinese growth remained more or less below 5% largely due to tariff war with USA and lack of domestic demand coupled with the aftermath of turbulence in the real estate sector. It has been observed that prolonged policy uncertainty could dampen both consumption and investment. Moreover further escalation of protectionist measures both tariff and non tariff  barriers could suppress investment and disrupt supply chains and productivity. Similarly larger than expected shocks in labour supply especially from restrictive immigration policies could reduce growth more so in countries where ageing  population and skill shortages do exist. On the otherhand fiscal vulnerabilities and financial market fragiliities also adversely affect. Differences in appropriating gains from Artificial Intelligence can play significant role in growth. Monetary policy  should be calibrated to balance price stability and risks. In any case policy makers should establish clear, transparent and rule based trade policy  road maps to reduce uncertainty and support investment so as  to reap productivity growth and trade benefits so as to sustain resilience. Another threat to resilience is increasing  frequeny of climate change which is real now and many of the country's across continents are vulnerable to it  and tackling it requires concerted effort from all stake holders including national governments, private sector, NGOs and multilateral institutions and agencies. 

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