Brooks said the IMF has raised its 2025 global growth forecast to 3.2 percent, supported by investment in artificial intelligence and flexible fiscal policies.
However, she warned that renewed weakness in China’s property sector and shifting trade flows could pose significant headwinds.
Ahram Online: How has the IMF revised its global growth forecast for 2025 in light of persistent inflation, tighter financial conditions, and geopolitical fragmentation?
Petya Koeva Brooks: We have revised our forecast and now expect global growth to reach 3.2 percent this year, which marks a slowdown compared to last year.
For 2026, we project growth to ease further to 3.1 percent.
Interestingly, the 3.2 percent figure is 0.2 percent point higher than our July estimate, but still slightly lower than what we anticipated a year ago, before the tariff shocks emerged. It is a complex picture.
The tariff shock is not the only factor; there is also front-loading of trade, relatively benign financial conditions, supportive fiscal policy, and a surge in AI-driven investment. All these elements are shaping the outlook.
AO: What risks does the slowdown in China’s property sector pose to emerging markets and global trade flows?
PKB: Our forecast for China remains unchanged from July: 4.8 percent growth this year and 4.2 percent next year.
That stability reflects strong performance in the first half of the year, followed by a slowdown in the second half.
We have seen renewed weakness in the property sector, and while the authorities have taken some steps, we believe a comprehensive policy package is needed, one that facilitates the exit of unviable developers and supports homebuyers.
Given China’s size and importance to the global economy, any slowdown there has spillover effects. That said, we are confident the authorities have the tools to manage the situation.
AO: How is this affecting global trade flows?
PKB: Trade developments have been quite dynamic. As a share of global output, trade has held steady, partly due to front-loading; companies rushed to import goods ahead of anticipated tariffs. That was a temporary factor.
Now, we are seeing redirection in trade flows: fewer Chinese exports to the US, but increased exports to the euro area and ASEAN countries. The dust has not settled yet, and we are monitoring these shifts closely.
AO: What impact could a prolonged US government shutdown have on global financial stability, investor sentiment, and multilateral coordination?
PKB: We are watching this very closely. It is not part of our baseline projections in the World Economic Outlook report. It is too early to assess the full impact, but we are hopeful a compromise will be reached to ensure full government funding.
The consequences will depend on the duration and modalities of the shutdown. Once we have more clarity, we will update our assessment accordingly.
AO: What are the IMF’s recommendations for managing debt vulnerabilities in developing countries amid rising external borrowing costs?
PKB: Debt vulnerabilities have built up not only in developing countries but also in many advanced economies.
For developing economies, which are especially exposed to external shocks, our key recommendation is fiscal adjustment, particularly through domestic revenue mobilization.
We understand fiscal space is limited, but raising revenues is essential. At the same time, it is crucial to protect the most vulnerable during adjustment.
Ultimately, growth is the foundation. Structural and governance reforms are vital, and our advice is tailored to each country’s context.
There is no single solution; rather, a broad set of actions is needed to create fiscal space and resilience.
AO: Finally, what are the key risks and opportunities shaping the broader regional economic outlook, especially considering ongoing geopolitical tensions and energy market dynamics?
PKB: On the upside, faster-than-expected normalization of conflicts and aggressive implementation of long-standing structural reforms could significantly boost growth.
On the downside, global policy uncertainty is a major risk. If it materializes, it could dampen domestic demand and tighten external financing conditions, both of which would hurt the region.
We also face the possibility of renewed global inflationary pressures, which would raise financing costs and complicate the outlook for many countries in the region.
Short link: