IMF lifts 2025 GDP emerging economies' outlook on improved China view

• The International Monetary Fund raised its outlook for economic growth across emerging market and developing economies this year to 4.1% from 3.7%, driven by frontloading and a more upbeat view on China. In an update published on Tuesday to its flagship World Economic Outlook report, the IMF also nudged its 2026 economic growth forecast for emerging economies up to 4.0% from 3.9%.
• China received the largest upgrade with the IMF predicting the world's number two economy would expand 4.8% this year compared with a previous forecast for 4.0%. "This revision reflects stronger-than-expected activity in the first half of 2025 and the significant reduction in U.S.–China tariffs," the IMF said, adding that the latest forecasts assumed the U.S. effective tariff rate at 17.3% rather than the 24.4%, which formed the basis of its calculations in April.
• The IMF also noted that for all countries, "pauses on higher tariffs are assumed to remain in place past their expiration dates and higher rates are assumed not to take effect". Risks for the outlook are tilted downward, the IMF said, given the "precarious equilibrium of trade policy stances assumed in the baseline."
• The upgrade for emerging markets reflects a more optimistic outlook globally by the IMF, which nudged global GDP growth forecast up to 3.0% for 2025 and to 3.1% in 2026. However, those levels still mark a downgrade on the Fund's projections made in January.

(Source: Reuters)