IMF Raises Emerging Market Forecast on Upbeat China View
By Reuters | 29 Jul, 2025

Improving outlook on China's growth makes IMF rairse 2025 growth rate for developing economies to 4.1%.

Mainland Chinese tourists take photo of the skyline of buildings at Tsim Sha Tsui, in Hong Kong, China May 2, 2023. REUTERS/Tyrone Siu/File Photo

The International Monetary Fund raised its outlook for economic growth across emerging market and developing economies this year to 4.1% from 3.7%, driven by frontloading and a more upbeat view on China.  

In an update published on Tuesday to its flagship World Economic Outlook report, the Fund also nudged its 2026 economic growth forecast for emerging economies up to 4.0% from 3.9%.

China received the largest upgrade with the Fund predicting the world's number two economy would expand 4.8% this year compared with a previous forecast for 4.0%.

"This revision reflects stronger-than-expected activity in the first half of 2025 and the significant reduction in U.S.–China tariffs," the IMF said, adding that the latest forecasts assumed the U.S. effective tariff rate at 17.3% rather than the 24.4% which formed the basis of its calculations in April.

The Fund also noted that for all countries "pauses on higher tariffs are assumed to remain in place past their expiration dates and higher rates are assumed not to take effect".

China posted 5.2% growth in the second quarter but cracks are showing in the export-led economy at the center of the trade war.

Beijing is facing an August 12 deadline to reach a durable tariff agreement with Washington, after reaching preliminary deals in May and June. Many countries will see higher duties starting later this week. Negotiations continue Tuesday in Stockholm.

Risks for the outlook are tilted downward, the IMF said, given the "precarious equilibrium of trade policy stances assumed in the baseline."

The upgrade for emerging markets reflects a more optimistic outlook globally by the Fund, which nudged global GDP growth forecast up to 3.0% for 2025 and to 3.1% in 2026. However, those levels still mark a downgrade on the Fund's projections made in January.

While most individual economies received upgrades, Russia and South Korea were the exception. 

Russia's economy is now seen expanding 0.9% this year, from a previous view of 1.5% growth. South Korea's new 0.8% GDP growth forecast for 2025 compares with 1.0% previously.

(Reporting by Rodrigo Campos in New York; Editing by Andrew Heavens and Joe Bavier)