Modified Forecast for German Economic Development by the IMF Mildly Optimistic
The International Monetary Fund (IMF) has recently revised its global economic growth forecasts, projecting a growth rate of 3.0% for 2025 and 3.1% for 2026. This slight upward revision reflects factors such as stronger front-loading of economic activity ahead of tariff implementations, lower effective tariff rates, easier financial conditions including a weaker US dollar, and fiscal expansion in some key economies.
The outlook for major economies shows a mixed picture. The growth forecasts for the United States, United Kingdom, and Germany have been slightly increased or remain steady. China's growth forecast has been nudged up due to successful export reorientation despite an overall economic slowdown. Slight improvements in growth projections are also seen for India. However, Japan and Russia have experienced downward revisions for 2026 and both 2025/2026 respectively, reflecting specific regional challenges.
Despite the tentative resilience and slight improvement in growth prospects for 2025, key risks remain. These include downside risks dominated by potential escalations in trade tensions or protectionism, persistent policy uncertainty in trade and fiscal areas, geopolitical tensions, vulnerabilities related to fiscal sustainability in some countries, the possibility that financial conditions may tighten abruptly, and inflation remaining above target in the United States.
IMF Chief Economist Pierre-Olivier Gourinchas emphasized the need for policies that restore confidence, predictability, and sustainability, including transparent trade policies, rebuilding fiscal buffers, maintaining price and financial stability, preserving central bank independence, and implementing structural reforms to support long-term growth.
The IMF warns that economic uncertainty remains elevated. Associated uncertainties and geopolitical risks include the potential for a sudden tightening in financial conditions, an escalation of geopolitical tensions, particularly in the Middle East or Ukraine, which could bring new negative supply shocks to the global economy. Shipping routes and supply chains could be disrupted, while commodity prices could rise, especially if supply infrastructure is damaged.
The U.S. higher tariffs for most of its trading partners are set to expire on August 1. However, the U.S. government has threatened to impose even higher tariffs on some trading partners in July. Central banks could face more difficult compromises, as they already grapple with challenges in the trade environment.
In summary, while the global economy shows a slight improvement in growth prospects for 2025, key risks remain from geopolitical tensions, trade policy uncertainty, and the potential for sudden tightening in financial conditions. It is crucial for policymakers to implement measures that foster confidence, predictability, and sustainability to ensure long-term growth and stability.
Businesses and the finance sector should be attentive to geopolitical tensions and trade policy uncertainty in 2025, as these factors could potentially disrupt shipping routes and supply chains, leading to increased commodity prices. The IMF underscores the necessity for policymakers to implement measures that promote confidence, predictability, and sustainability, which could benefit both businesses and the finance sector in the long term.
