## DEVELOPMENT COMMITTEE: THE MANAGING DIRECTOR'S WRITTEN STATEMENT — October 2025

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### Economic outlook and risks
- Global growth projections:
  - Global growth projected to decelerate from 3.3 percent in 2024 to 3.2 percent in 2025 and to 3.1 percent in 2026.
  - World output projected to expand at an average annual pace of 3.2 percent in 2027–30, compared with the pre-pandemic (2000–19) average of 3.7 percent.
- Near-term dynamics:
  - The first half of 2025 recorded relatively robust global growth driven largely by temporary factors—including front-loading of trade and investment and inventory management strategies—rather than fundamental economic strength.
  - As these factors fade, activity is slowing and labor markets are softening, reflecting headwinds from protectionism and uncertainty.
- Advanced Economies (AEs) and Emerging and Developing Economies (EMDEs):
  - AEs: growth projected at 1.6 percent in 2025 and 2026, against 1.8 percent in 2024; United States slowing from 2.8 percent in 2024 to 2.0 percent in 2025.
  - EMDEs: growth projected to moderate from 4.3 percent in 2024 to 4.2 percent in 2025 and 4.0 percent in 2026.
  - Regional variations: Middle East and Central Asia projected to accelerate from 2.6 percent in 2024 to 3.5 percent in 2025; emerging and developing Europe projected to decline from 3.5 percent in 2025 to 1.8 percent; emerging and developing Asia projected to decline from 5.3 percent to 5.2 percent; sub-Saharan Africa and Latin America and the Caribbean projected to remain stable at 4.1 percent and 2.4 percent in 2025, respectively.
- Low-Income Developing Countries (LIDCs):
  - Growth for LIDCs projected at 4.4 percent in 2025—slightly above the 4.2 percent reached in 2024—and at 5.0 percent in 2026.
  - LIDCs face high debt vulnerabilities, a dearth of external financing flows, cuts to official aid, and, for some, the impact of new restrictions on immigration affecting remittances.
  - The world’s poorest economies, including those suffering from prolonged conflict, are at risk of decelerating growth momentum and widening per capita income gaps relative to advanced economies.
- Inflation and risk outlook:
  - Global headline inflation projected to decline to 4.2 percent in 2025 and 3.7 percent in 2026, from 5.8 percent in 2024.
  - Notable country-level revisions: upward in Brazil, Mexico, United Kingdom, and United States; downward elsewhere.
  - Risks tilted to the downside: prolonged uncertainty, escalation of protectionist measures, labor supply disruptions, disappointing productivity gains from AI, disruptions in private credit markets, abrupt repricing of assets, renewed fiscal sustainability worries, escalation of conflicts and commodity price spikes.
  - Upside scenarios: trade negotiation breakthroughs lowering tariffs, renewed reform momentum, faster productivity growth due to AI.

### Policy priorities
- Overall strategic goals:
  - Implement credible and sustainable policy actions, build resilience against shocks, safeguard macroeconomic and financial stability, and undertake structural reforms to unlock private sector-led growth.
  - Strong and independent national economic institutions are essential for policy credibility and public trust.
- Trade and external imbalances:
  - Urgent need for pragmatic solutions to ease trade tensions and remove uncertainty on trade policy.
  - Trade rules should be modernized for the digital age.
  - Prudence in subsidies and industrial policies to avoid unfair competitive advantage and trade distortions.
  - Countries with excess surpluses should boost domestic demand; countries with excess deficits need to reduce fiscal deficits.
  - Pursue bilateral, regional, and plurilateral negotiations to lower trade barriers while limiting discriminatory elements that risk negative third-country spillovers.
- Fiscal policy and debt sustainability:
  - Implement credible medium-term fiscal consolidation to restore buffers and build resilience, combining spending rationalization with revenue mobilization and prioritizing measures that raise efficiency and promote private investment while protecting the most vulnerable.
  - Any new support measures should be temporary, well-targeted, and offset with clear savings.
  - Where debt is not sustainable, restoring sustainability may require restructuring of public debt in addition to fiscal consolidation.
  - Continue operationalizing the G20 Common Framework and promote greater convergence of practices through the Global Sovereign Debt Roundtable (GSDR).
- Monetary and financial stability:
  - Monetary policy should remain data-driven and country specific; central banks should preserve price stability in line with their mandate.
  - In countries imposing tariffs, central banks will likely face a sharper tradeoff between price stability and output; in countries facing tariffs, gradual easing could become appropriate once disinflation is firmly established.
  - Exchange rates should act as shock absorbers; use the Integrated Policy Framework (IPF) for guidance when exchange-rate movements become disorderly.
  - Financial policies should prioritize containing liquidity risks in nonbank finance and preserving resilience in the core banking system.
  - Strengthen bond market resilience by reducing fiscal risks and enhancing market structures.
  - Monitor risks from crypto assets, including stablecoins, which could accelerate currency substitution and undermine monetary sovereignty in countries with weak currencies, high inflation, and low trust in central banks.
  - International cooperation is essential given cross-border nature of many challenges.
- Structural reforms:
  - Embrace reforms to improve the business environment, address governance weaknesses and corruption, streamline excessive regulation, develop capital markets, promote entrepreneurship, and encourage competition.
  - Labor market reforms to increase participation and upgrade skills; competition and product-market reforms to foster entry and reallocate resources toward high-productivity firms; advances in digitalization and AI to lift productivity and expand potential growth.
  - For LIDCs, strengthen capacity to mobilize domestic resources through governance and administrative reforms and implement growth-enhancing reforms.
  - Donors should explore ways to mobilize more development assistance, including technical assistance and financial support, particularly for adaptation projects to cope with climate change impacts.

### IMF support and institutional actions
- IMF roles and tools:
  - The IMF provides tailored macroeconomic, fiscal and financial policy advice, capacity development (CD), and, where necessary, lending to support members facing balance of payments needs.
  - Strengthening data integrity and transparency remains fundamental to IMF surveillance, lending, and CD.
  - Work continues to modernize the Fund’s policy frameworks, tools, and internal operations.
- Reviews and reforms under way:
  - Comprehensive Surveillance Review (CSR) priorities: promoting resilience and growth through granular policy advice; strengthening assessment of external imbalances and outwards spillovers; supporting members’ capacity to manage shocks; developing a prioritization framework for IMF engagement.
  - CSR will deepen macrofinancial and financial sector analysis in bilateral surveillance, aligning with the ongoing FSAP review where relevant.
  - Reforms to the Poverty Reduction and Growth Trust (PRGT) are being fully implemented to ensure capacity to support low-income countries; securing assurances of additional PRGT subsidies from the membership remains a top priority.
  - The Review of Program Design and Conditionality will strengthen IMF program design, including in cases involving exceptional access.
  - Measures to boost effectiveness and uptake of the Fund’s precautionary facilities are being explored, including through the upcoming Review of the Short-Term Liquidity Line.
  - A recent IMF paper assesses the adequacy of the global financial safety net (GFSN) and outlines areas for improvement.
- Capacity development and debt work:
  - IMF CD delivery being enhanced in line with the Fund’s 2024 CD Strategy; integrate CD with surveillance and lending; new Strategic Results Framework to evaluate CD traction; leveraging technology to improve CD reach and effectiveness.
  - Together with the World Bank, reviewing the joint IMF-World Bank debt sustainability framework for low-income countries (LIC DSF) to better incorporate drivers of debt vulnerabilities; updating guidance note on the debt sustainability framework for market-access countries.
  - Scaling up support to individual restructuring cases and addressing bottlenecks to improve predictability and timeliness of restructuring processes, including through the GSDR.
  - Working with the World Bank to advance implementation of the 3-pillar approach to assist countries with sustainable debt facing debt-service challenges.
- Institutional resilience:
  - Work toward implementing the 50 percent quota increase under the 16th General Review of Quota (GRQ) is ongoing.
  - Developing principles to guide future discussions on quota and governance.
  - The Fund’s budget remains broadly the same in real terms as it was two decades ago; a streamlining exercise identified efficiency gains to prioritize highest needs.
  - Continued commitment to attracting and retaining top talent.

*THE MANAGING DIRECTOR’S WRITTEN STATEMENT — October 2025*

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_Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025037.pdf_