The global economy is still on a path to slower growth, IMF says

The global economy is still on a slower growth track in the years ahead, the IMF says — even if tariff threats proved to be less economically damaging than previously believed.Why it matters: New projections from the IMF show a brighter outlook relative to early 2025, though dimmer prospects compared to those outlined this time last year.The group is skeptical the AI boom, at least in the near-term, can make up for the global economy's tariff hit — and warn that there is risk of an AI-related bubble popping.What they're saying: "[D]espite multiple offsetting drivers, the tariff shock is further dimming already lackluster growth prospects," IMF chief economist Pierre-Olivier Gourinchas writes in a blog released alongside the new forecasts."Even in the United States, growth is weaker and inflation higher than we projected last year — hallmarks of a negative supply shock," Gourinchas adds.By the numbers: The IMF projects the global economy will grow by 3.2% this year and 3.1% in 2026. The forecasts are better than those projected in July, but cumulatively 0.2 percentage points below the estimates from this time one year ago.It's a similar story for the United States: The IMF projects the domestic economy will grow by 2% in 2025, a massive slowdown from the 2.8% growth rate last year.That 2% growth is marginally higher than what was anticipated in the spring and summer, though still below the 2.2% rate that was anticipated a year ago.The intrigue: AI-related investments — along with lower tariffs implemented by the U.S. —are the key reason why growth has fared slightly better than expected. But the IMF warns that the investment surge is among the biggest downside risks for the global economy. "Markets could reprice sharply, especially if AI fails to justify lofty profit expectations," Gourinchas writes, adding that "continued exuberance may require tighter monetary policy just as in the late 1990s" during the dot-com boom."That would dent wealth and curb consumption, with adverse effects potentially reverberating through the financial system."Yes, but: Investment surge aside, the IMF says the productivity effects from AI could be a tailwind for growth in the months and years ahead — though growth effects could be undercut by continued trade tensions."Under modest assumptions, the combined effects of lower uncertainty, lower tariffs and AI could raise global output by about 1% in the near term," Gourinchas says.Reducing tariff rates to levels that prevailed before President Trump took office could raise global growth by roughly 0.3 percentage points, the IMF projects.What to watch: Renewed tensions between the U.S. and China last week show the tricky balance for the global economy, with trade seemingly at risk of being upended at any moment.Trump threatened to impose an additional 100% tariff on all Chinese imports on Nov. 1 if China moved ahead with stricter export controls. Over the weekend, Trump said it "will all be fine" with China — without taking the tariff threat off the table.

Comments

World news

Independent

Why the 90s is tasting pretty darned good in this economy: How nostalgia and Americans’ pocketbooks are bringing brands like Chi-Chi’s back from the dead

about 1 hour ago

Ukraine cannot win against Russia, warns top British army chief

Independent

Comments

World news

Why the 90s is tasting pretty darned good in this economy: How nostalgia and Americans’ pocketbooks are bringing brands like Chi-Chi’s back from the dead

Ukraine cannot win against Russia, warns top British army chief

Can you actually fool AI to push your resume to the top of the pile?

US treasury secretary and Chinese vice premier plan another meet over ‘unsustainable’ tariff hike

Boy’s prosthetic eye shows love for Jays

One scandal too many forces UK monarchy to sideline Prince Andrew

Investigation launched after budget airline jet almost dives into ocean moments after takeoff

Heightened sense of urgency around this 'No Kings Day'

Man fakes his own funeral ‘to see who shows up and how much they care’

Cruz Beckham is the unlikely anti-nepo baby

Novak Djokovic could not be more wrong about padel

Trump’s Zelensky meeting confirms one thing: Putin is leading negotiations

From EVs to Heathrow – China’s extraordinary grip on UK infrastructure

Why the release of Israeli hostage bodies could yet derail Trump’s peace deal

Seven easy ways to supercharge your diet – without overhauling it

Bernie-backed Maine Senate candidate Graham Platner melts down

Chinese Nobel Prize-winning physicist Chen Ning Yang dies at 103

SeaWorld trainer butchered by killer whale who turned 'psychotic' in captivity

Moment Ukraine destroys Putin's floating bomb as Russia launches fresh attacks

Man living with dead mum in flat he'd not left for eight years

Skeletons found in mass grave are ancient Roman soldiers, study finds

'It's a joyous moment' - Brother of Prince Andrew accuser

National Guard activated ahead of No Kings protests planned across US

Smuggler jailed for 40 years after shipping ballistic missile parts from Iran

Ontario Psychologists Clash Over How Much Training Is Enough

A Popular Afghan Singer Challenges the Taliban With Song

The Kids Who Sued Trump Just Lost Big in Court. Or Did They?

Carter interception, TD run key in Lions’ win

Israel identifies remains of another hostage handed over by Hamas

Kremlin pitches £6,000,000,000 ‘peace bridge’ between Russia and America

Harper Lee’s short stories are charming – but what if she never wanted them published?

The five best poetry books of all time, according to Hollie McNish

Afghan and Pakistani delegations head to Doha for crisis talks

'I was forced to watch my wife be gang raped by seven men - it was three hours of hell'

Budget airliner hurtles towards sea at 300mph seconds after take off

Skeletal woman 'locked in bedroom for 27 YEARS' utters three chilling words when found

Where the 'most beautiful girl in world' is now after viral fame and controversy

Chinese Nobel laureate and physicist Chen Ning Yang dies aged 103

Ohtani rewrites history to send Dodgers to World Series

After Zelenskyy meeting, Trump calls on Ukraine and Russia to 'stop where they are' and end the war

Lions win fifth straight, eliminate Elks

The China spy case debacle shows governments have few secrets worth knowing

I’m a tour guide – banning loudspeakers can’t come soon enough

How to save your soil after the dry summer, according to an RHS expert

Gen Z protests against corruption and inequality are shaking Morocco. Here's what to know

Heavy security after deadly violence in Kenya as thousands turn out to mourn former PM Odinga

Mexican artisans turn clay into Trees of Life that are celebrated worldwide

Deadly floods in Mexico another sign of need for improved severe weather warnings

Hamas returns remains of 10th Israeli hostage from Gaza

The female scientists who finally found an answer to endometriosis wait times

‘We’re not communists’: One club’s fight for English rugby’s soul

I moved to the Tuscan village that pays people €20k to live there

Three easy and flavourful Indian recipes, including creamy chicken curry

Stephen Mangan: ‘We don’t live for ever – my mum’s death taught me that when I was young’

I’m 69 and struggling to pay bills – I was cheated when my pension was frozen

Reeves is doom and gloom but her messy Budget may be ‘hated’ Starmer’s only hope

The 14 best new children’s books for autumn 2025

The monarchy is stronger now Andrew and Fergie are banished

Three ways Newcastle’s new director of football will change transfer plans

'Putin is afraid,' says Zelenskyy - as Tomahawk missiles not ruled out