On July 29, the International Monetary Fund (IMF) released its July 2025 World Economic Outlook (WEO). The key highlights of the report are as follows.
First, the IMF revised upward its global economic growth forecast for this year to 3.0%, an increase of 0.2%p from the April projection, and for 2026 to 3.1%, an increase of 0.1%p. This revision takes into account factors such as ①a reduction in the average effective U.S. tariff rates, ②an increase in front-loading in anticipation of higher tariffs, ③eased financial conditions including a weaker U.S. dollar, and ④fiscal expansion in major economies.
The IMF updated its growth forecasts for the group of advanced economies – including Korea, the United States, the United Kingdom, Germany, France, Japan, and 41 countries in total – to 1.5% for 2025 and 1.6% for 2026, marking an upward adjustment of 0.1%p for both years compared to previous projections. In the case of the United States, growth projections for both 2025 and 2026 were modestly raised (to 1.9% and 2.0%, respectively), driven by lower tariff rates, eased financial conditions, and the effects of the One Big Beautiful Bill Act (OBBBA) tax reform. For the other advanced economies excluding the G7 and the Eurozone (projected at 1.6% for 2025 and 2.1% for 2026), despite accommodative financial conditions, the growth rate for 2025 is expected to decline compared to earlier forecasts due to currency appreciation and tariff increases on automobiles and steel, with some improvement anticipated in 2026.
Meanwhile, the IMF revised Korea’s growth forecast for 2025 downward by 0.2%p to 0.8% compared to the April projection, but significantly raised the 2026 forecast by 0.4%p to 1.8%.
With regard to inflation, the IMF projects a general downward trend, with rates of 4.2% in 2025 and 3.6% in 2026, while noting divergent patterns across countries. For 2025, inflation in advanced economies is expected to remain unchanged from the April forecast at 2.5%, whereas emerging markets have been revised downward by 0.1%p to 5.4%.
The IMF assessed that the risks to the global economy are tilted to the downside, highlighting that developments in trade policy constitute a key variable shaping the direction of these risks. Among the downside factors, the IMF pointed to rising effective tariff rates and the lack of progress in tariff negotiations, which increase policy uncertainty and could dampen business investment and trade flows, thereby weakening growth momentum. In addition, geopolitical tensions were noted as potential sources of further pressure on supply chains and inflation.
The IMF recommended the following policy efforts to mitigate these uncertainties and lay the foundation for sustainable growth. Above all, it emphasized the need to design industrial policies that minimize market distortions and to expand regional and multilateral trade agreements in order to create a predictable trade environment. On the fiscal front, the IMF recommended maintaining essential expenditures such as defense while formulating a medium-term fiscal plan to secure fiscal capacity through revenue enhancement and expenditure efficiency. Furthermore, it urged continued structural reform efforts aimed at boosting growth potential, while maintaining a balance between price stability and financial market stability.
More detailed information on the report is available on the official IMF website: www.imf.org
Please refer to the attached files.
