The International Monetary Fund (IMF) has raised its 2025 global growth forecast to 3.2% from 3.0% in July, reflecting modest improvements in trade and resilience in major economies.

However, the Fund cautions that the pace of global economic growth remains weaker than pre-pandemic trends, with protectionism, fiscal strain, and policy uncertainty continuing to limit momentum.

The IMF's latest World Economic Outlook, released this week, warns that without structural reform and predictable trade rules, the global economy risks: “settling into a low-growth equilibrium.”

Advanced economies are expected to expand by just 1.6% in both 2025 and 2026, with the United States slowing to 2.1% next year as inflation risks persist.

Emerging and developing economies are seen growing at 4.2%, down from previous estimates, reflecting weaker trade flows and fading post-pandemic momentum.

Global trade volume is forecast to rise by an average of 2.9% over the next two years, well below pre-pandemic levels.

For South Africa, the IMF projects growth of around 1.1% in 2025, constrained by electricity shortages, logistics bottlenecks, and subdued private investment. For 2026 growth is expected at 1.2%, slightly lower than the 1.3% previously forecast by the IMF. Inflation is expected to remain relatively low, allowing the Reserve Bank to begin gradual rate cuts later in the year. Yet the report cautions that: “structural constraints continue to weigh heavily on potential output,” noting that debt levels above 70% of GDP leave little room for fiscal manoeuvre.

The IMF urges governments to rebuild fiscal buffers, maintain policy credibility, and pursue reforms that lift productivity and labour participation. While the forecast has improved slightly, the Fund warns that sustained global growth will depend on lowering trade barriers and stabilising public finances.