IMF Predicts Steady Growth in 2025, But Warns of Uneven Recovery and Rising Risks

The IMF’s April 2025 World Economic Outlook projects stable global growth at 3.2% for 2024–2025 amid slowing inflation, but warns of widening disparities between advanced and developing economies. It stresses urgent reforms in productivity, climate resilience, and AI adaptation to secure long-term stability.

The April 2025 edition of the International Monetary Fund’s World Economic Outlook, produced by its Research Department under Pierre-Olivier Gourinchas with critical input from institutions like the Bank for International Settlements, OECD, and the World Bank, paints a cautiously optimistic yet complex picture of global economic recovery. While the most turbulent waves of the COVID-19 pandemic and the energy-price shocks linked to the war in Ukraine appear to be fading, global growth remains stubbornly modest. The IMF forecasts a steady growth rate of 3.2 percent in both 2024 and 2025, signaling a return to pre-pandemic norms. Yet beneath the surface, fault lines have widened between advanced and developing economies, between inflation trajectories, and in the ability of nations to withstand new global shocks. The Fund underscores that this is not a story of universal recovery but one of fragmentation, with countries increasingly shaped by their own internal strengths or weaknesses.

Advanced Economies Diverge as U.S. Leads, Europe Lags

Among advanced economies, the United States has emerged as a surprising driver of global resilience. Strong consumer demand, robust labor markets, and ongoing fiscal support have allowed the U.S. economy to outperform expectations, providing a much-needed boost to global trade and capital flows. In contrast, the euro area continues to underwhelm, with sluggish growth dragging on due to structural weaknesses, high energy costs, and a more restrictive credit environment. Germany’s manufacturing sector, once a symbol of resilience, is now stagnating. Japan, while showing some signs of recovery, remains hamstrung by demographic headwinds and persistent productivity challenges. The IMF urges advanced economies to refocus on long-term reforms, especially in labor and digital sectors, to avoid being locked into a low-growth trap. While inflation in many of these countries is trending downward, particularly in goods and energy, sticky service prices and wage pressures continue to challenge central bankers.

Emerging Economies: The Tale of Uneven Momentum

Across emerging markets and developing countries, the picture is one of divergence. India stands out, poised to grow at over 6 percent, thanks to strong domestic demand, a young labor force, and government-driven structural reforms. Brazil and Mexico also show resilience, aided by improving investor sentiment and successful monetary tightening campaigns. However, China’s recovery has lost momentum. The combination of a weakened real estate sector, declining business confidence, and insufficient consumer demand is preventing China from regaining its traditional role as a global growth engine. More worryingly, low-income developing countries are facing what the IMF describes as a “silent crisis.” Saddled with high public debt, limited fiscal space, and growing vulnerability to climate and geopolitical shocks, these countries are falling further behind. Without enhanced external support, improved governance, and domestic reform, the goals of poverty reduction and sustainable development may remain out of reach for many nations on the periphery.

Inflation Retreats But the Policy Path Is Narrow

Global inflation has eased dramatically from its 2022 highs, helped by tighter monetary policy, stabilizing commodity prices, and the normalization of global supply chains. In advanced economies like the U.S., U.K., and the eurozone, headline inflation is falling, though core inflation, particularly in services, remains sticky. Many emerging markets, having raised interest rates early in the cycle, are now among the first to begin cutting them. Brazil and Chile, for example, have already shifted toward easing. However, the IMF advises caution. It stresses that central banks must remain vigilant, as inflation expectations are not yet fully anchored in all regions. Premature easing, especially in advanced economies, risks reversing hard-won gains. Rate cuts by the Federal Reserve and European Central Bank are likely to come only later in 2025, contingent on continued progress. The message is clear: policymakers must walk a tightrope, balancing the need to support growth without reigniting inflationary pressures.

Technology, Climate, and Reform: Keys to Long-Term Resilience

Beyond the cyclical fluctuations of growth and inflation, the IMF places strong emphasis on the structural reforms needed to ensure long-term global stability. Chief among these is investment in human capital, infrastructure, and digital transformation. Weak productivity growth continues to be a drag on many economies, and the Fund urges countries to embrace digital innovation, reform labor markets, and foster competitive environments. Climate change remains a looming threat. Increasingly frequent and severe weather events are causing economic disruptions, particularly in vulnerable low-income nations, necessitating urgent investment in green infrastructure and climate adaptation. The Fund advocates for carbon pricing and public-private financing partnerships to accelerate the transition to low-carbon economies. A novel focus in this report is the potential impact of artificial intelligence. The IMF suggests that AI could significantly boost global productivity, but warns of short-term disruptions, particularly to middle-skill jobs in administration and clerical work. Governments are encouraged to adopt proactive strategies, reskilling programs, education system reforms, and social safety nets to manage this transition equitably. All of this must occur amid elevated public debt and limited fiscal space, making efficient, well-targeted policies more critical than ever.