GLOBAL ECONOMY | Friday, January 17

Global Economy Improves While IMF Warns Trump Policies Could Spark Trouble


Just in time for the USA to welcome President-elect Trump back into the Oval Office, the International Monetary Fund (IMF) released its latest World Economic Outlook, providing updated forecasts for America and the rest of the world.

The IMF indicates some semi-bullish figures, showing that global economic growth is expected to reach 3.3% in 2025, improving slightly from 3.2% in 2024 and stabilizing at 3.3% in 2026. Don't start aping meme stocks and crypto coins quite yet, though, as this growth remains below the pre-pandemic average of 3.7% from 2000 to 2019, signaling some hesitation/pause. 

Additionally, global inflation is forecasted to decline from 5.7% in 2024 to 4.2% in 2025 and 3.5% in 2026, reflecting a gradual easing of worldwide price pressures. This will likely give consumers (and FED Chair Powell) some reason to exhale and relax.

Regarding the USA, the IMF has raised its U.S. growth forecast to 2.7% for 2025, citing stronger-than-expected consumer spending, giving President-elect Trump and his administration a positive start to their time in office. That said, the IMF has some precautions, specifically Trump's economic playbook, warning that his proposed cocktail of tax cuts, tariffs, and immigration curbs could amplify inflationary pressures just as the global economy needs stability.

Shifting focus to Europe, they are struggling to keep their footing. Germany and France's manufacturing sorrows have forced downward revisions from the IMF, though the UK's projected 1.6% growth in 2025 offers a rare bright spot in an otherwise tepid European forecast. The Fund's message to policymakers is crystal clear on protectionist measures. It feels more worried than bullish about the dangerous game of economic chicken the most prominent players are gearing towards, risking retaliatory spirals that could kneecap global trade. 

The IMF's cautionary tone on financial deregulation is particularly pointed given that Trump's campaign promises to dismantle oversight. This strategy has market veterans recalling pre-2008 warning signs that sent the USA and the world into an economic tailspin. In the Fund's view, the incoming administration's slash-and-burn approach to regulation could be playing with matches in a room full of gasoline.