Global GDP Growth Projections 2023-2026

This economic analysis is synthesised from the World Economic Outlook 2025 Update, Global Financial Stability Report, Future of Jobs Report 2025, and Fiscal Monitor. The analysis highlights the macroeconomic outlook, financial stability risks, labor market trends, and fiscal policy projections for 2025.

Global Economic Outlook for 2025

• Growth Projection: Global growth is forecasted at 3.3% in both 2025 and 2026, below the historical average of 3.7%. The outlook remains divergent across regions, with strong demand in the U.S. but weaker momentum in Europe and parts of Asia .

• Regional Growth Trends:

• United States: Growth at 2.7%, driven by strong labor markets and investment, but expected to taper by 2026.

• Euro Area: Growth revised down to 1.0% in 2025, reflecting geopolitical tensions and weak manufacturing.

• China: Growth at 4.6%, slightly up due to fiscal support but hindered by property market weakness and trade uncertainties .

• India: Strongest among major economies at 6.5%, supported by domestic consumption.

• Emerging Markets & Developing Economies: Diverging performance, with some countries benefiting from commodity prices while others face trade and investment headwinds.

Global Economic Growth: Divergent Outcomes

IMF growth projections for 2024–2026 (global, advanced, and emerging economies). In the January 2025 update, the IMF projected steady but sub-par global growth of about 3.3% in 2025, with advanced economies around 1.9% and emerging economies ~4.2%.

The World Economic Outlook (WEO) Update (Jan 2025) forecasts moderate global GDP growth of 3.3% in 2025, roughly unchanged from 2024 . However, it warned of divergent paths: an upward revision for the United States offset by slower growth in Europe and Asia . Recent trends largely align with this outlook – the U.S. economy remains a bright spot while Europe and China underperform. Major institutions and analysts also see 2025 growth in the low-3% range globally, below the pre-pandemic average . Geopolitical uncertainties (e.g. the war in Ukraine, US–China trade frictions) and tighter monetary policies have kept the world economy on a “steady but slow” trajectory rather than a rapid rebound. Below is a breakdown of key economies:

Global GDP Growth Projections (2023-2026): Graph compares global, advanced economies, and emerging markets’ growth rates.

• United States: The IMF sharply upgraded its U.S. forecast, projecting 2.7% growth in 2025 (up from 2.2% before) . This optimism reflects the robust momentum in late 2024 – U.S. GDP grew around 2.8% in 2024 driven by strong consumer spending . So far, reality supports this: low unemployment and hefty fiscal stimulus (infrastructure and green investments) have kept the U.S. expansion surprisingly resilient. Recent data shows the Fed’s aggressive rate hikes have slowed interest-sensitive sectors (housing, tech), but no recession has materialized, and the U.S. continues to outpace other advanced economies (2024 U.S. growth was well above the 1.7% average for advanced economies) . That said, the Fed’s “higher for longer” stance and fading fiscal impulse could cool growth in 2025, so the question is whether the U.S. can maintain its current above-trend pace.

• Euro Area: The IMF’s outlook for advanced economies in 2025 is modest (~1.9% growth) , and Europe is a chief reason for caution. High energy costs and tighter financial conditions have left European growth nearly stagnant. Germany, for instance, lagged with a weak performance in 2024 – its export-oriented manufacturing sector was hit by rising input costs and softer Chinese demand. While Europe’s worst energy crisis has abated (natural gas prices normalized from 2022 peaks), the lingering effects of inflation and the ECB’s rate hikes have dampened consumer spending and investment. Recent indicators show the euro zone teetering on the edge of recession in late 2024, validating the IMF’s downbeat projection. On a positive note, easing inflation should gradually restore purchasing power in 2025, and EU-wide fiscal support (NextGeneration EU funds, etc.) could provide some growth lift. But overall, Europe’s actual performance diverges on the downside from the global outlook – the IMF flagged the euro area as a soft spot amid “divergent and uncertain” global growth .

• China: The WEO had anticipated China’s growth to slow into the 4–5% range as its post-pandemic rebound wanes, and indeed 2024 undershot expectations. In Q3 2024 China grew only 4.7% year-on-year, weaker than forecast . The ongoing real estate downturn and low consumer confidence have been a major drag. The property sector’s struggles – with several large developers defaulting and housing sales slumping – have spilled over to construction and local government finances, restraining growth. Exports have also been lackluster amid soft global demand. Beijing has responded with targeted stimulus (rate cuts, modest infrastructure spending), preventing a hard landing but not sparking a robust recovery. The IMF’s report noted “fragilities in [China’s] financial system” as a key downside risk to global growth . Recent news supports this concern: China’s government has stepped in with support measures to prop up the housing market and shore up trust in its financial institutions . In short, China’s actual trajectory is weaker than hoped, aligning with the IMF’s caution that a delayed property stabilization would weigh on its outlook. For 2025, consensus forecasts hover in the mid-4% range – solid by advanced economy standards but a far cry from China’s pre-pandemic boom.

• India: India continues to be a growth leader. The IMF projects 6.5% growth in 2025, in line with India’s strong potential and unchanged from prior forecasts . There was a slight hiccup in 2024 as Indian growth slowed more than expected in the middle of the year, mainly due to a sharp deceleration in manufacturing and industrial activity . Even so, India likely grew around 6% in 2024, and recent quarters saw a pickup in services and consumer demand. Robust credit growth, public infrastructure spending, and recovering rural incomes are supporting activity. The IMF expects India’s expansion to remain solid and even strengthen going into 2025–26 . Early signs from late 2024 (higher PMI indices, easing inflation boosting consumption) suggest India is on track to meet these optimistic projections. Barring an external shock, India’s economy appears to be following the projected path, serving as a key engine of global growth alongside the U.S.

Bottom line: Global growth is broadly evolving as the IMF’s 2025 Update envisioned – “stable but underwhelming” . The composition differs slightly (the U.S. is outperforming while China and Europe underperform), but the overall 3%-ish growth pace seems on point . Crucially, downside risks remain prominent. Central banks worldwide are finishing their hiking cycles, which should gradually relieve growth headwinds in 2025, yet high debt and geopolitical tensions could easily knock the recovery off course. The IMF highlighted that “medium-term risks…are tilted to the downside”, and real-world developments (from China’s property woes to persistent war-driven uncertainty) validate that caution . Policymakers are therefore juggling the trade-off between sustaining growth and containing inflation, hoping to achieve the “soft landing” that markets have grown optimistic about. Recent central bank decisions reflect this balancing act: for example, the Federal Reserve and European Central Bank paused rate increases in late 2024, but have stressed that policy will stay tight until inflation is convincingly tamed – a stance very much in line with IMF advice to “push back against overly optimistic easing expectations” . In sum, the WEO projections mostly align with current trends, though the U.S.’s surprising strength and China/Europe’s weakness are notable divergences shaping the global landscape.

Sources: World Economic Outlook Update (IMF, Jan 2025) ; Global Financial Stability Report (IMF, Apr/Oct 2024) ; Fiscal Monitor (IMF, Oct 2024) ; WEF Future of Jobs Report 2025 ; Reuters and news reports for recent economic developments .