IMF raises this year's global economic growth rate from 3.0%→3.2%, South Korea from 0.8%→0.9%

"Compared with April and July, tariff shocks and financial conditions have eased"

U.S. also revised up from 1.9% to 2.0%, China maintains 4.8% growth

The International Monetary Fund (IMF) said that tariff shocks and financial conditions turned out to be milder than expected and raised its 2025 global economic growth forecast to 3.2% from 2.8% announced in April and 3.0% announced in July. It projected 3.1% for next year.

South Korea's growth was revised up by 0.1 percentage point to 0.9% this year, from the 0.8% projected in July, and next year's growth was maintained at 1.8%.

On the 14th (local time), the IMF released the 'World Economic Outlook 2025' and said that recent trade agreements among the United States and several major economies are expected to somewhat mitigate the worst tariff-driven slowdown that Trump had threatened.

Advanced economies are expected to achieve growth of about 1.5%, while emerging market and developing economies are expected to realize growth slightly above 4%. Inflation is expected to continue declining globally. The United States is expected to exceed target levels, while other regions are expected to maintain theirs.

The IMF said that in addition to lower-than-expected tariffs from trade negotiations, private sector responses that brought imports forward and rapidly reorganized supply chains, dollar weakness, fiscal stimulus in Europe and China, and an AI investment boom have supported global economic growth.

Chief economist Pierre-Olivier Gourinchas said, "It's not as bad as we feared, but worse than we expected a year ago."

However, the threat of a trade war has resurfaced as President Trump threatened to impose 100% tariffs on Chinese-made products in addition to an average 55% tariff on Chinese goods as retaliation for China's expanded controls on rare earth exports.

Gourinchas added, "If the situation worsens, growth forecasts could be lowered again and uncertainty that suppresses investment and spending could increase."

The IMF said that in a downside risk scenario where tariffs rise above current levels, global economic growth in 2026 would decline by 0.3 percentage point, and the negative impact would grow to more than 0.6 percentage point by 2028. This models the impact if tariffs on Chinese goods were 30 percentage points higher than current levels, and tariffs on Japan, the Eurozone, and Asian emerging markets were 10 percentage points higher.

The IMF estimated that if other potential negative effects such as higher inflation, rising interest rates, and reduced demand for U.S. assets are added, world GDP could contract by 1.2 percentage points in 2026 and 1.8 percentage points in 2027.

Under the IMF's baseline forecast, the U.S. outlook still shows strong resilience, with 2025 growth expected to be slightly revised up to 2.0% from the July forecast of 1.9%. It is projected at 2.1% in 2026. While improved from the July forecast of 1.9%, this is still well below the U.S. growth rate of 2.8% in 2024.

The IMF cited lower-than-feared tariff rates, fiscal support, eased financial conditions, and an AI investment boom as factors supporting U.S. economic growth.

China is expected to maintain 4.8% growth in 2025, helped by export increases that are expected to be unsustainable, and is projected at 4.2% in 2026.

The IMF forecast that the Eurozone growth rate would also slightly improve from 1.0% in July to 1.2%, supported by Germany's fiscal expansion and Spain's continued strong momentum.

Japan, which avoided U.S. tariffs through proactive trade measures in the first half, saw a substantial increase from 0.7% in July to 1.1% thanks to wage growth and rising domestic consumption. Next year this trend is expected to partly reverse, falling to 0.6% in 2026, but still 0.1 percentage point higher than the July forecast.

Guest reporter Jeong-a Kim kja@hankyung.com