The International Monetary Fund (IMF) released its latest World Economic Outlook (WEO) in October 2025, providing a comprehensive assessment of the global economy and growth projections for the coming years. The report underscores a mixed global outlook, shaped by inflationary pressures, geopolitical uncertainties, and ongoing trade tensions.

Global Growth Outlook

The IMF projects global GDP growth to moderate from 3.3% in 2024 to 3.2% in 2025, with a further slight decline to 3.1% in 2026.

Key drivers include:

Advanced Economies: Growth in advanced economies is expected to remain subdued at 1.6% annually. The U.S. economy is projected to slow from 2.8% in 2024 to 2.0% in 2025, improving marginally to 2.1% in 2026.

Emerging Markets and Developing Economies (EMDEs): Collectively, EMDEs are expected to grow just above 4% annually, with India emerging as the fastest-growing major economy.

Inflation: Global inflation is showing signs of easing, though regional disparities remain. While the U.S. continues to face upside inflation risks, other regions experience more subdued pressures.

India’s Strong Economic Performance

India continues to stand out on the global stage:

The IMF has raised India’s GDP growth forecast for FY26 by 20 basis points to 6.6%, citing a strong first quarter that offset the impact of U.S. rate hikes.

The forecast for FY27 has been revised upward by 20 basis points to 6.2%.

The World Bank also highlighted India’s position as the world’s fastest-growing major economy, driven by robust domestic consumption and ongoing investment activities.

Key considerations for India’s growth:

Strong domestic consumption and private investment.

Resilience to global monetary tightening and external shocks.

Potential impact of global trade dynamics and policy decisions on future growth.

Impact of U.S.-China Trade Tensions

The IMF report emphasizes that ongoing trade tensions between the U.S. and China are creating significant uncertainties for global economic growth:

The recent imposition of tariffs by the U.S. and retaliatory measures by China have disrupted global supply chains and increased costs for businesses worldwide.

These trade tensions are prompting many countries to diversify trade relationships and seek new strategic partnerships, including regional trade agreements.

Examples of global response:

New Zealand is strengthening regional ties through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Other economies are exploring bilateral trade agreements with emerging markets to mitigate risks from major trade disruptions.

Key Global Highlights from the IMF Report

Global Growth: Revised downward to 3.2% in 2025 and 3.1% in 2026, reflecting ongoing challenges.

Advanced Economies: Subdued growth, with the U.S. expected to slow from 2.8% in 2024 to 2.0% in 2025.

Emerging Markets: India leads with 6.6% growth in FY26, driven by consumption and investment.

Trade Tensions: U.S.-China disputes continue to disrupt global supply chains, influencing growth prospects worldwide.

Inflation Outlook: Global inflation is easing, though specific risks remain region-specific.

Key Risks

Risks are tilted to the downside:​

Escalation of protectionism: Further tariff increases could reduce global growth by over 0.6 percentage points by 2028​

Prolonged uncertainty: Trade policy uncertainty could reduce investment by up to 2% over two years​

Labor supply shocks: Sharp reductions in immigration, particularly in the US, are creating labor market tightness and reducing potential growth​

Fiscal vulnerabilities: High debt levels, rising interest rates, and significant refinancing requirements threaten fiscal sustainability​

Financial market corrections: Stretched valuations in AI and tech stocks risk abrupt repricing and market volatility​

Institutional erosion: Pressure on central bank independence could undermine sound economic policymaking​

Policy Recommendations

The IMF urges policymakers to restore confidence through credible, transparent, and sustainable policies:​

Trade Policy: Establish clear roadmaps and durable agreements to reduce uncertainty; pursue trade diplomacy paired with macroeconomic adjustment.​

Fiscal Policy: Rebuild fiscal buffers and pursue consolidation to ensure debt sustainability; address spending pressures from aging populations, defense, and energy security.​

Monetary Policy: Central banks should maintain independence and respond appropriately to domestic inflation dynamics; policy paths will diverge across countries.​

Structural Reforms: Redouble efforts on growth-enhancing reforms to address low productivity, aging populations, and market rigidities.​

Industrial Policy: Can play a role in boosting productivity and resilience but requires careful targeting, strong institutions, complementary structural reforms, and sound fiscal management to avoid inefficiencies and large costs.

Implications for Businesses and Investors

The IMF report signals a period of cautious optimism for global growth:

India remains a key market for investors seeking high growth potential.

Businesses should consider diversifying supply chains to mitigate the risks posed by trade conflicts.

Monitoring geopolitical developments and central bank policies will remain critical for strategic planning.

Conclusion

The IMF’s October 2025 World Economic Outlook underscores the complex interplay of domestic economic policies, global trade relations, and geopolitical risks in shaping the future trajectory of the global economy. While near-term growth has proven more resilient than feared in April, medium-term prospects remain dim at around 3.1%—well below the pre-pandemic average of 3.7%. The global economy is adapting to a new landscape marked by greater protectionism, trade fragmentation, and elevated policy uncertainty.

India’s resilience stands out as a beacon of growth, while global businesses must navigate uncertainties stemming from trade disputes and macroeconomic pressures. The report reinforces the need for strategic foresight, market diversification, and proactive engagement in an increasingly interconnected global economy.