According to an October 2025 report from the International Monetary Fund (IMF), the global economy is adjusting to a period marked by slowing growth, persistent inflation differentials, and increasing protectionist measures.
The IMF raised its global growth forecast to 3.2 percent in 2025 and 3.1 percent in 2026, higher than the April forecast but still lower. expectations before policy changes. Inflation is expected to fall to 4.2 percent in 2025 and 3.7 percent in 2026, while global trade growth remains subdued at 2.9 percent year-on-year, well below average through 2024.
Tariffs, industrial policy and diverging fiscal trajectories
The report highlights the growing impact of tariffs and industrial policy on trade flows. The US imposed average tariffs of 19 percent, causing changes in global supply chains and altering market sentiment. Meanwhile, China's economic growth has slowed to around four percent, held back by weak property markets and limited returns from industrial subsidies in key sectors such as electric vehicles and solar power.
The IMF warns that fiscal and monetary policies are increasingly diverging. Some advanced economies continue to pursue expansionary fiscal policies despite high real interest rates, raising financial sustainability risks. It calls for credible fiscal consolidation and prudent monetary normalization to preserve stability.
Financial Markets and Industrial Policy Trends
The IMF says global financial markets are being reshaped by growing investment in artificial intelligence and digital technologies, which could lead to short-term productivity gains. However, it warns that asset price adjustments remain a risk if expected gains do not materialize.
A separate chapter of the report examines the rise of industrial policies around the world, acknowledging their potential to spur innovation but warning against prolonged or opaque financial support. The IMF calls for transparent, time-bound and fiscally coherent measures to avoid market distortions.
Regional growth forecasts
Forecasts IMF for 2025:
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