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OCTOBER 2025

For the US, higher tariffs have led to a rise in inflation since
Global Growth Forecasts (y-o-y%) May 2025, heightened uncertainty, deteriorating business
sentiment, and lower new investments. The escalating costs
3.3 to businesses, coupled with weakening labour market
3.2 3.2 conditions - fewer new jobs addition and high unemployment
3.1 3.1 rate (4.3 per cent in August 2025 – the highest since 2021),
3.0 3.0 are likely to keep near-term consumption demand, and in turn,
growth subdued. Lesser room for the Federal Reserve to
2.8 target growth amid rising inflation may also add to growth
woes for the US.

China’s forecasts, at 4.8 per cent (2025) and 4.2 per cent
Oct-24 Apr-25 Jul-25 Oct-25 (2026), remain unchanged from the July figures, even as
downside risks including uncertainty on tariffs, continuing
2025 (P) 2026 (P) crisis in the property sector and subdued consumption
demand continue to weigh on growth outlook. In the near-term,
Note: P is projection China’s anti-involution drive could have a contractionary
1
Source: IMF WEO periodic updates impact on output during second half of 2025, as the
government bars price-wars and self-destructive competition
in some sectors (solar, EV, cement, battery, e-commerce). The
Major world economies showcase slowdown in growth during July-September 2025 (4.8 per cent
year-on-year), from 5.2 per cent in the previous quarter, may be
resilience, but sector-specific issues, an early indication of this. Anti-involution, however, is likely to
trade challenges, and tepid business mitigate persisting deflationary pressures and aid in margin
confidence persist improvement of firms.

In the October update, Japan’s growth outlook has improved
to a relatively greater extent as compared with other major
Growth projections by the IMF WEO for 2025 and 2026 for
major economies of the world show a mixed trend, partly economies. In 2025, the economy is now expected to grow at
reflecting the impact of higher import prices, lower export a faster pace of 1.1 per cent, compared with 0.7 per cent in
demand and supply chain disturbances amid US tariffs, but July, on the back of rising real wages and robust corporate
profits that could boost domestic demand. For 2026 as well,
also highlighting differences in country specific domestic the forecast has been revised modestly upward to 0.6 per
conditions. While growth in the US, China and Canada over the
two years is expected to moderate as compared to 2024 cent from 0.5 per cent in July. However, growth remains
levels, Euro Area (EA), Japan and the UK are expected to sensitive to tightening financial conditions, hawkish monetary
experience an overall upturn. policy, and softening external demand.

Real GDP Growth (y-o-y%)

2024 2025 (P) 2026 (P)
5
4.8
4.2

3.3 3.2 3.1
2.8

2.0 2.1
1.6
1.3 1.3 1.2 1.5
1.1 1.1 1.2 1.1
0.9
0.6
0.2

USA China Japan UK Canada EA World

Source: IMF WEO October 2025 update; P is projection

1 A policy or strategy to combat "involution," a term for destructive and unprofitable competition or stagnation
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