IMF Projects Global Economic Slowdown Over the Next Two Years

The International Monetary Fund (IMF) released its latest World Economic Outlook (WEO) on October 14, 2025, projecting a gradual slowdown in global economic growth over the next two years. The report forecasts a decrease from 3.3% in 2024 to 3.2% in 2025, and further to 3.1% in 2026, reflecting the global economy's adjustment to new policy measures and evolving trade agreements.

IMF Chief Economist Pierre-Olivier Gourinchas noted that while the global economy has weathered recent trade shocks better than expected, the outlook remains fragile. He highlighted that the impact of tariff measures was milder than anticipated due to trade exemptions, restrained retaliation, and swift private-sector adjustments. However, Gourinchas warned of potential downside risks, including a possible market correction from the artificial intelligence investment boom, structural vulnerabilities in China's economy, insufficient fiscal space in many countries, and growing political pressure on central banks that could undermine monetary credibility.

The WEO provides detailed regional economic outlooks:

• United States: Growth is projected at 2.0% in 2025 and 2.1% in 2026, supported by tax cuts and developments in artificial intelligence. However, inflation is expected to remain above target, with risks tilted to the upside.

• Eurozone: Growth rates are forecasted at 1.2% for 2025 and 1.1% for 2026. The increase in U.S. tariffs and elevated uncertainty weigh on the expected pick-up in domestic demand.

• China: The 2025 growth forecast remains unchanged at 4.8%, though concerns persist over its property market and potential financial instability.

• Latin America: The region's forecast rose due to Mexico’s improved outlook.

Global inflation is projected to continue declining, though with variation across countries. In the United States, inflation is expected to remain above target, with risks tilted to the upside, while in other regions, inflation is anticipated to be more subdued.

The IMF warns that risks are tilted to the downside, citing prolonged uncertainty, increased protectionism, and labor supply shocks as potential threats to growth. Policymakers are urged to restore confidence through credible, transparent, and sustainable policies, emphasizing the importance of trade diplomacy, fiscal buffer rebuilding, and central bank independence.

The projected slowdown in global economic growth has several social and societal implications:

• Employment: Slower economic growth may lead to reduced job creation, potentially increasing unemployment rates in various regions.

• Income Inequality: Economic slowdowns often disproportionately affect lower-income populations, potentially exacerbating income inequality.

• Social Services: Governments may face challenges in funding social services due to decreased tax revenues resulting from slower economic growth.

The current projections indicate a continued trend of slowing global growth observed in recent years. In April 2025, the IMF had already downgraded its global growth forecast to 2.8% for 2025, citing increased tariffs and global trade uncertainty. The October 2025 projections suggest a slight improvement but still reflect a cautious outlook.

In conclusion, the IMF's October 2025 World Economic Outlook provides a comprehensive analysis of the global economic landscape, highlighting the challenges ahead and offering policy recommendations to navigate the uncertain terrain.