## Annex Table 1). The upward revision for

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---

### Broad-based upward revision for 2025
- The upward revision for 2025 is described as "quite broad based" and owes largely to:
  - strong front-loading in international trade,
  - a lower worldwide effective tariff rate than assumed in the April reference forecast,
  - an improvement in global financial conditions.
- Front-loading is expected to unwind in the coming quarters, with payback weighing on activity in 2026 but offset by other developments, so growth overall is revised slightly upward.

### Major growth projections and revisions (advanced economies)
- World Output:
  - 2025: 3.0
  - 2026: 3.1
  - Difference from April 2025 WEO projections: 2025 = 0.2, 2026 = 0.1
- Advanced Economies:
  - 2025: 1.5 percent
  - 2026: 1.6 percent
  - Difference from April: 2025 = 0.1, 2026 = 0.1
- United States:
  - 2025: 1.9 percent (0.1 percentage point higher than the April reference forecast)
  - 2026: 2.0 percent (0.3 percentage point higher than the April reference forecast)
  - IMF staff estimate: the OBBBA could raise US output by about 0.5 percent on average over the WEO horizon through 2030, relative to a baseline without this fiscal package.
- Euro area:
  - 2025: 1.0 percent (upward revision of 0.2 percentage point for 2025)
  - 2026: 1.2 percent (forecast unchanged from April)
  - Note: the 2025 upward revision is largely driven by a historically large increase in Irish pharmaceutical exports; Ireland represents less than 5 percent of euro area GDP. Without Ireland, the revision would be 0.1 percentage point.
- Other Advanced Economies:
  - 2025: 1.6 percent
  - 2026: 2.1 percent
  - Effective tariff rates are the same or slightly higher than in the April WEO reference forecast in some cases (new tariffs on vehicle parts in May and doubling of tariffs on steel and aluminum in June).

### Emerging Market and Developing Economies (EMDEs)
- Aggregate EMDEs:
  - 2025: 4.1 percent
  - 2026: 4.0 percent
  - Difference from April: 2025 = 0.4, 2026 = 0.1
- China:
  - 2025: 4.8 percent (revised upward by 0.8 percentage point)
    - The first-quarter 2025 GDP outturn implies a mechanical upgrade to the growth rate for the year of 0.6 percentage point.
  - 2026: 4.2 percent (revised upward by 0.2 percentage point)
  - Revisions reflect stronger-than-expected activity in the first half of 2025 and significant reduction in US–China tariffs; inventory accumulation recovery expected to partly offset front-loading payback in H2 2025.
- India:
  - 2025: 6.4 percent
  - 2026: 6.4 percent
  - Both numbers revised slightly upward reflecting a more benign external environment.
- Regional projections:
  - Middle East and Central Asia: 2025 = 3.4 percent; 2026 = 3.5 percent
  - Sub-Saharan Africa: 2025 = 4.0 percent; 2026 = 4.3 percent
  - Latin America and the Caribbean: 2025 = 2.2 percent; 2026 = 2.4 percent
  - Emerging and developing Europe: 2025 = 1.8 percent; 2026 = 2.2 percent

### Trade, inflation, and commodity projections
- World trade volume (goods and services):
  - Revision: 2025 = upward by 0.9 percentage point; 2026 = downward by 0.6 percentage point
- World Consumer Prices:
  - 2025: 4.2 percent
  - 2026: 3.6 percent
  - Virtually unchanged from the April WEO; trends of cooling demand and falling energy prices remain in place.
- Tariffs and inflation dynamics:
  - Tariffs act as a supply shock in tariff-imposing countries (gradual pass-through to US consumer prices hitting inflation in H2 2025) and as a negative demand shock elsewhere (lowering inflationary pressures).
  - United States: inflation projected to remain above the 2 percent target through 2026.
  - Euro area: inflationary dynamics expected to be more subdued (currency appreciation and one-off fiscal measures).
  - China: headline inflation broadly unchanged; core inflation revised to 0.5 percent in 2025 and 0.8 percent in 2026.
- Oil price assumption (based on futures markets as of June 26, 2025):
  - Average assumed price of oil in US dollars a barrel: $68.18 for 2025 and $64.33 for 2026.
- Selected Table 1 highlights (year-over-year unless noted):
  - World Output: 2023 = 3.5; 2024 = 3.3; 2025 = 3.0; 2026 = 3.1
  - United States: 2023 = 2.9; 2024 = 2.8; 2025 = 1.9; 2026 = 2.0
  - China: 2023 = 5.4; 2024 = 5.0; 2025 = 4.8; 2026 = 4.2
  - India (FY basis shown in table): 2023 = 9.2; 2024 = 6.5; 2025 = 6.4; 2026 = 6.4
  - World Trade Volume: 2023 = 1.0; 2024 = 3.5; 2025 = 2.6; 2026 = 1.9

### Risks and scenarios
- Overall risks remain tilted to the downside, as in the April WEO.
- Trade policy risk scenarios:
  - If tariff rates are reset to the maximum of April-2 rates and rates in letters sent up to July 14 and implemented on August 1, staff simulations suggest global growth in 2025 would be roughly 0.2 percentage point lower.
  - Implementation of tariffs as high as 50 percent on copper (as currently pronounced) would dampen global growth.
  - Additional sectoral tariffs (electronics, pharmaceuticals) and nontariff measures targeting critical inputs could raise effective tariff rates, create bottlenecks, and amplify direct effects.
  - Elevated trade policy uncertainty, even without new measures, could weigh on activity as current US deadlines expire without comprehensive agreements.
- Geopolitical escalation:
  - Tensions in the Middle East or Ukraine could introduce negative supply shocks, disrupt shipping routes and supply chains, raise commodity prices, lower growth, and reignite inflation.
- Fiscal and financial vulnerabilities:
  - Large fiscal deficits and historically high public debt in economies including Brazil, France, and the United States could raise term premiums and tighten global financial conditions.
  - An increase in US term premiums could interact with concerns about geoeconomic fragmentation and the international monetary system centered on the dollar, making financial markets excessively volatile.
- Front-loading exposures:
  - Inventory overhangs could reduce import orders more than projected; firms may face higher holding costs and obsolescence risks if demand for stockpiled goods does not materialize.

### Policy recommendations and conditional guidance
- Trade policy and cooperation:
  - Reduce policy-induced uncertainty by promoting clear and transparent trade frameworks.
  - Pursue multilateral initiatives on the global commons, modernize trade rules where feasible, and seek plurilateral or regional solutions where appropriate.
  - Use bilateral negotiations to defuse trade tensions and aim to reduce trade and investment barriers without increasing barriers toward third parties.
  - Address root causes of tensions, specifically excess external imbalances arising from internal policy choices; identify and resolve underlying distortions.
  - Industrial policies should be narrowly targeted to resolve specific, well-identified externalities and market failures; pragmatic cooperation can reduce negative spillovers.
- Fiscal policy:
  - Restore fiscal space and ensure sustainable public debt through credible medium-term fiscal consolidation with growth-friendly adjustments and a focus on rebuilding buffers.
  - Enhance fiscal revenues, improve spending efficiency, crowd in private sector investment, and use automatic stabilizers for negative demand shocks.
  - Any new discretionary measures should be well targeted, temporary with clear sunset clauses, and offset by spending cuts elsewhere or new revenues—especially in countries with limited fiscal space.
- Monetary policy:
  - Central banks must calibrate monetary policies to country-specific circumstances to maintain price and financial stability amid prolonged trade tensions and evolving tariffs.
  - In tariff-imposing countries (supply shock), central banks face a trade-off between shielding the real sector and preventing one-off price increases from becoming persistent; further easing should depend on convincing evidence that inflation and expectations are heading back to target.
  - In countries not imposing tariffs (demand shock), central banks could gradually reduce the policy rate.
  - Allow exchange rates to adjust under normal circumstances; consider temporary foreign exchange interventions or capital flow management measures if disruptive movements occur, following the IMF’s Integrated Policy Framework.
- Financial stability and communications:
  - Robust prudential policies are required to safeguard financial stability amid elevated uncertainty and volatility.
  - Clear and consistent messaging from central banks and protection of central bank independence—both legally and in practice—are crucial.
- Preparedness and reforms:
  - Use scenario analysis and contingency plans to prepare for different risks.
  - Lift medium-term growth prospects through enduring structural reforms in labor markets, education, regulation, and competition.
  - Foster technological advancements, including digitalization and adoption of artificial intelligence, to enhance productivity and potential growth.

### Box 1. GLOBAL FINANCIAL STABILITY UPDATE
- Market conditions and overall assessment:
  - Global financial conditions have eased since the April Global Financial Stability Report, reverting toward accommodative conditions by historical standards.
  - Equity valuations have returned to lofty levels.
  - Corporate credit spreads have tightened to the lows attained at the beginning of the year.
  - Market volatility has declined, despite still-elevated uncertainty regarding trade policy.
  - Market participants remain attentive to any lagged impact from tariffs on economic data, which so far remain largely resilient.
  - A rebound of tariffs to meaningfully higher levels following the end of the pauses in effect could weigh on market sentiment, potentially triggering again a sharp repricing in risk assets.
- Monetary policy expectations and heterogeneity across countries:
  - Monetary policy paths in major advanced economies are expected to be shallower compared with what was expected in April and remain uneven across countries reflecting different stages of cycles amid varying paces of disinflation.
  - Market pricing implies:
    - The European Central Bank, after having cut sequentially, may cut rates once more this year before ending its current easing cycle.
    - The Federal Reserve and Bank of England will continue easing, with each cutting rates around twice more this year after pausing to assess incoming data.
    - Japan remains an outlier, with markets pricing in a modest, though declining, likelihood of another rate hike this year.
- Sovereign yields and bond market dynamics:
  - Sovereign yield curves for major advanced economies have steepened since April as bond issuance has continued to rise.
  - Drivers of upward pressure on longer-term yields include:
    - Widening fiscal deficits.
    - Reduced demand for duration by liability-driven investors.
    - Quantitative tightening.
  - Despite bouts of upward yield pressures in advanced economies, local currency yields in emerging markets have generally declined, aided by a weaker dollar.
- US dollar, currencies, and capital flows:
  - The US dollar has weakened considerably since April, although yields in the United States are higher than those in other advanced economies such as the euro area.
  - Some investors point to structural factors driving dollar depreciation, including shifts away from US securities, though current data on cross-border capital flows does not suggest a broad-based pullback.
  - Increased hedging against dollar weakness resulting from investor concerns about changes in the historical hedging properties of the dollar has contributed to its depreciation in part.
  - Whether a switch in the currencies’ perceived risk-hedging properties is temporary or proves longer-lasting remains uncertain.
  - Many emerging market currencies have appreciated, and capital inflows have resumed since April, with investors seeing space for some emerging market central banks to ease.
- Selected Economies: Real GDP Growth (Percent change) — Difference from April 2025 WEO Projections
  - Argentina: 2023 = –1.9 | 2024 = –1.3 | 2025 = 5.5 | 2026 = 4.5 | 2025 = 0.0 | 2026 = 0.0
  - Australia: 2023 = 2.1 | 2024 = 1.0 | 2025 = 1.8 | 2026 = 2.2 | 2025 = 0.2 | 2026 = 0.1
  - Brazil: 2023 = 3.2 | 2024 = 3.4 | 2025 = 2.3 | 2026 = 2.1 | 2025 = 0.3 | 2026 = 0.1
  - Canada: 2023 = 1.5 | 2024 = 1.6 | 2025 = 1.6 | 2026 = 1.9 | 2025 = 0.2 | 2026 = 0.3
  - China: 2023 = 5.4 | 2024 = 5.0 | 2025 = 4.8 | 2026 = 4.2 | 2025 = 0.8 | 2026 = 0.2
  - Egypt 2/: 2023 = 3.8 | 2024 = 2.4 | 2025 = 4.0 | 2026 = 4.1 | 2025 = 0.2 | 2026 = –0.2
  - France: 2023 = 1.6 | 2024 = 1.1 | 2025 = 0.6 | 2026 = 1.0 | 2025 = 0.0 | 2026 = 0.0
  - Germany: 2023 = –0.3 | 2024 = –0.2 | 2025 = 0.1 | 2026 = 0.9 | 2025 = 0.1 | 2026 = 0.0
  - India 2/: 2023 = 9.2 | 2024 = 6.5 | 2025 = 6.4 | 2026 = 6.4 | 2025 = 0.2 | 2026 = 0.1
  - Indonesia: 2023 = 5.0 | 2024 = 5.0 | 2025 = 4.8 | 2026 = 4.8 | 2025 = 0.1 | 2026 = 0.1
  - Iran 2/: 2023 = 5.0 | 2024 = 3.5 | 2025 = 0.6 | 2026 = 1.1 | 2025 = 0.3 | 2026 = 0.0
  - Italy: 2023 = 0.7 | 2024 = 0.7 | 2025 = 0.5 | 2026 = 0.8 | 2025 = 0.1 | 2026 = 0.0
  - Japan: 2023 = 1.4 | 2024 = 0.2 | 2025 = 0.7 | 2026 = 0.5 | 2025 = 0.1 | 2026 = –0.1
  - Kazakhstan: 2023 = 5.1 | 2024 = 4.8 | 2025 = 5.0 | 2026 = 4.3 | 2025 = 0.1 | 2026 = 0.0
  - Korea: 2023 = 1.6 | 2024 = 2.0 | 2025 = 0.8 | 2026 = 1.8 | 2025 = –0.2 | 2026 = 0.4
  - Malaysia: 2023 = 3.5 | 2024 = 5.1 | 2025 = 4.5 | 2026 = 4.0 | 2025 = 0.4 | 2026 = 0.2
  - Mexico: 2023 = 3.4 | 2024 = 1.4 | 2025 = 0.2 | 2026 = 1.4 | 2025 = 0.5 | 2026 = 0.0
  - The Netherlands: 2023 = –0.6 | 2024 = 1.1 | 2025 = 1.2 | 2026 = 1.2 | 2025 = –0.2 | 2026 = –0.2
  - Nigeria: 2023 = 2.9 | 2024 = 3.4 | 2025 = 3.4 | 2026 = 3.2 | 2025 = 0.4 | 2026 = 0.5
  - Pakistan 2/: 2023 = –0.2 | 2024 = 2.5 | 2025 = 2.7 | 2026 = 3.6 | 2025 = 0.1 | 2026 = 0.0
  - Philippines: 2023 = 5.5 | 2024 = 5.7 | 2025 = 5.5 | 2026 = 5.9 | 2025 = 0.0 | 2026 = 0.1
  - Poland: 2023 = 0.2 | 2024 = 2.9 | 2025 = 3.2 | 2026 = 3.1 | 2025 = 0.0 | 2026 = 0.0
  - Russia: 2023 = 4.1 | 2024 = 4.3 | 2025 = 0.9 | 2026 = 1.0 | 2025 = –0.6 | 2026 = 0.1
  - Saudi Arabia: 2023 = 0.5 | 2024 = 2.0 | 2025 = 3.6 | 2026 = 3.9 | 2025 = 0.6 | 2026 = 0.2
  - South Africa: 2023 = 0.8 | 2024 = 0.5 | 2025 = 1.0 | 2026 = 1.3 | 2025 = 0.0 | 2026 = 0.0
  - Spain: 2023 = 2.7 | 2024 = 3.2 | 2025 = 2.5 | 2026 = 1.8 | 2025 = 0.0 | 2026 = 0.0
  - Thailand: 2023 = 2.0 | 2024 = 2.5 | 2025 = 2.0 | 2026 = 1.7 | 2025 = 0.2 | 2026 = 0.1
  - Türkiye: 2023 = 5.1 | 2024 = 3.2 | 2025 = 3.0 | 2026 = 3.3 | 2025 = 0.3 | 2026 = 0.1
  - United Kingdom: 2023 = 0.4 | 2024 = 1.1 | 2025 = 1.2 | 2026 = 1.4 | 2025 = 0.1 | 2026 = 0.0
  - United States: 2023 = 2.9 | 2024 = 2.8 | 2025 = 1.9 | 2026 = 2.0 | 2025 = 0.1 | 2026 = 0.3

*International Monetary Fund | July 2025*

### Annex Table 1). The upward revision for

### Annex Table 1). The upward revision for

### Broad-based upward revision for 2025
- The upward revision for 2025 is described as "quite broad based" and owes largely to:
  - strong front-loading in international trade,
  - a lower worldwide effective tariff rate than assumed in the April reference forecast,
  - an improvement in global financial conditions.
- Front-loading is expected to unwind in the coming quarters, with payback weighing on activity in 2026 but offset by other developments, so growth overall is revised slightly upward.

### Major growth projections and revisions (advanced economies)
- World Output:
  - 2025: 3.0
  - 2026: 3.1
  - Difference from April 2025 WEO projections: 2025 = 0.2, 2026 = 0.1
- Advanced Economies:
  - 2025: 1.5 percent
  - 2026: 1.6 percent
  - Difference from April: 2025 = 0.1, 2026 = 0.1
- United States:
  - 2025: 1.9 percent (0.1 percentage point higher than the April reference forecast)
  - 2026: 2.0 percent (0.3 percentage point higher than the April reference forecast)
  - IMF staff estimate: the OBBBA could raise US output by about 0.5 percent on average over the WEO horizon through 2030, relative to a baseline without this fiscal package.
- Euro area:
  - 2025: 1.0 percent (upward revision of 0.2 percentage point for 2025)
  - 2026: 1.2 percent (forecast unchanged from April)
  - Note: the 2025 upward revision is largely driven by a historically large increase in Irish pharmaceutical exports; Ireland represents less than 5 percent of euro area GDP. Without Ireland, the revision would be 0.1 percentage point.
- Other Advanced Economies:
  - 2025: 1.6 percent
  - 2026: 2.1 percent
  - Effective tariff rates are the same or slightly higher than in the April WEO reference forecast in some cases (new tariffs on vehicle parts in May and doubling of tariffs on steel and aluminum in June).

### Emerging Market and Developing Economies (EMDEs)
- Aggregate EMDEs:
  - 2025: 4.1 percent
  - 2026: 4.0 percent
  - Difference from April: 2025 = 0.4, 2026 = 0.1
- China:
  - 2025: 4.8 percent (revised upward by 0.8 percentage point)
    - The first-quarter 2025 GDP outturn implies a mechanical upgrade to the growth rate for the year of 0.6 percentage point.
  - 2026: 4.2 percent (revised upward by 0.2 percentage point)
  - Revisions reflect stronger-than-expected activity in the first half of 2025 and significant reduction in US–China tariffs; inventory accumulation recovery expected to partly offset front-loading payback in H2 2025.
- India:
  - 2025: 6.4 percent
  - 2026: 6.4 percent
  - Both numbers revised slightly upward reflecting a more benign external environment.
- Regional projections:
  - Middle East and Central Asia: 2025 = 3.4 percent; 2026 = 3.5 percent
  - Sub-Saharan Africa: 2025 = 4.0 percent; 2026 = 4.3 percent
  - Latin America and the Caribbean: 2025 = 2.2 percent; 2026 = 2.4 percent
  - Emerging and developing Europe: 2025 = 1.8 percent; 2026 = 2.2 percent

### Trade, inflation, and commodity projections
- World trade volume (goods and services):
  - Revision: 2025 = upward by 0.9 percentage point; 2026 = downward by 0.6 percentage point
- World Consumer Prices:
  - 2025: 4.2 percent
  - 2026: 3.6 percent
  - Virtually unchanged from the April WEO; trends of cooling demand and falling energy prices remain in place.
- Tariffs and inflation dynamics:
  - Tariffs act as a supply shock in tariff-imposing countries (gradual pass-through to US consumer prices hitting inflation in H2 2025) and as a negative demand shock elsewhere (lowering inflationary pressures).
  - United States: inflation projected to remain above the 2 percent target through 2026.
  - Euro area: inflationary dynamics expected to be more subdued (currency appreciation and one-off fiscal measures).
  - China: headline inflation broadly unchanged; core inflation revised to 0.5 percent in 2025 and 0.8 percent in 2026.
- Oil price assumption (based on futures markets as of June 26, 2025):
  - Average assumed price of oil in US dollars a barrel: $68.18 for 2025 and $64.33 for 2026.
- Selected Table 1 highlights (year-over-year unless noted):
  - World Output: 2023 = 3.5; 2024 = 3.3; 2025 = 3.0; 2026 = 3.1
  - United States: 2023 = 2.9; 2024 = 2.8; 2025 = 1.9; 2026 = 2.0
  - China: 2023 = 5.4; 2024 = 5.0; 2025 = 4.8; 2026 = 4.2
  - India (FY basis shown in table): 2023 = 9.2; 2024 = 6.5; 2025 = 6.4; 2026 = 6.4
  - World Trade Volume: 2023 = 1.0; 2024 = 3.5; 2025 = 2.6; 2026 = 1.9

### Risks and scenarios
- Downside tilt: overall risks remain tilted to the downside, as in the April WEO.
- Trade policy risk scenarios:
  - If tariff rates are reset to the maximum of April-2 rates and rates in letters sent up to July 14 and implemented on August 1, staff simulations suggest global growth in 2025 would be roughly 0.2 percentage point lower.
  - Implementation of tariffs as high as 50 percent on copper (as currently pronounced) would dampen global growth.
  - Additional sectoral tariffs (electronics, pharmaceuticals) and nontariff measures targeting critical inputs could raise effective tariff rates, create bottlenecks, and amplify direct effects.
  - Elevated trade policy uncertainty, even without new measures, could weigh on activity as current US deadlines expire without comprehensive agreements.
- Geopolitical escalation:
  - Tensions in the Middle East or Ukraine could introduce negative supply shocks, disrupt shipping routes and supply chains, raise commodity prices, lower growth, and reignite inflation.
- Fiscal and financial vulnerabilities:
  - Large fiscal deficits and historically high public debt in economies including Brazil, France, and the United States could raise term premiums and tighten global financial conditions.
  - An increase in US term premiums could interact with concerns about geoeconomic fragmentation and the international monetary system centered on the dollar, making financial markets excessively volatile.
- Front-loading exposures:
  - Inventory overhangs could reduce import orders more than projected; firms may face higher holding costs and obsolescence risks if demand for stockpiled goods does not materialize.

### Policy recommendations and conditional guidance
- Trade policy and cooperation:
  - Reduce policy-induced uncertainty by promoting clear and transparent trade frameworks.
  - Pursue multilateral initiatives on the global commons, modernize trade rules where feasible, and seek plurilateral or regional solutions where appropriate.
  - Use bilateral negotiations to defuse trade tensions and aim to reduce trade and investment barriers without increasing barriers toward third parties.
  - Address root causes of tensions, specifically excess external imbalances arising from internal policy choices; identify and resolve underlying distortions.
  - Industrial policies should be narrowly targeted to resolve specific, well-identified externalities and market failures; pragmatic cooperation can reduce negative spillovers.
- Fiscal policy:
  - Restore fiscal space and ensure sustainable public debt through credible medium-term fiscal consolidation with growth-friendly adjustments and a focus on rebuilding buffers.
  - Enhance fiscal revenues, improve spending efficiency, crowd in private sector investment, and use automatic stabilizers for negative demand shocks.
  - Any new discretionary measures should be well targeted, temporary with clear sunset clauses, and offset by spending cuts elsewhere or new revenues—especially in countries with limited fiscal space.
- Monetary policy:
  - Central banks must calibrate monetary policies to country-specific circumstances to maintain price and financial stability amid prolonged trade tensions and evolving tariffs.
  - In tariff-imposing countries (supply shock), central banks face a trade-off between shielding the real sector and preventing one-off price increases from becoming persistent; further easing should depend on convincing evidence that inflation and expectations are heading back to target.
  - In countries not imposing tariffs (demand shock), central banks could gradually reduce the policy rate.
  - Allow exchange rates to adjust under normal circumstances; consider temporary foreign exchange interventions or capital flow management measures if disruptive movements occur, following the IMF’s Integrated Policy Framework.
- Financial stability and communications:
  - Robust prudential policies are required to safeguard financial stability amid elevated uncertainty and volatility.
  - Clear and consistent messaging from central banks and protection of central bank independence—both legally and in practice—are crucial.
- Preparedness and reforms:
  - Use scenario analysis and contingency plans to prepare for different risks.
  - Lift medium-term growth prospects through enduring structural reforms in labor markets, education, regulation, and competition.
  - Foster technological advancements, including digitalization and adoption of artificial intelligence, to enhance productivity and potential growth.

*International Monetary Fund | July 2025*

### Box 1. GLOBAL FINANCIAL STABILITY

### Box 1. GLOBAL FINANCIAL STABILITY UPDATE

### Market conditions and overall assessment
- Global financial conditions have eased since the April Global Financial Stability Report, reverting toward accommodative conditions by historical standards.
- Equity valuations have returned to lofty levels.
- Corporate credit spreads have tightened to the lows attained at the beginning of the year.
- Market volatility has declined, despite still-elevated uncertainty regarding trade policy.
- Market participants remain attentive to any lagged impact from tariffs on economic data, which so far remain largely resilient.
- A rebound of tariffs to meaningfully higher levels following the end of the pauses in effect could weigh on market sentiment, potentially triggering again a sharp repricing in risk assets.

### Monetary policy expectations and heterogeneity across countries
- Monetary policy paths in major advanced economies are expected to be shallower compared with what was expected in April and remain uneven across countries reflecting different stages of cycles amid varying paces of disinflation.
- Market pricing implies:
  - The European Central Bank, after having cut sequentially, may cut rates once more this year before ending its current easing cycle.
  - The Federal Reserve and Bank of England will continue easing, with each cutting rates around twice more this year after pausing to assess incoming data.
  - Japan remains an outlier, with markets pricing in a modest, though declining, likelihood of another rate hike this year.

### Sovereign yields and bond market dynamics
- Sovereign yield curves for major advanced economies have steepened since April as bond issuance has continued to rise.
- Drivers of upward pressure on longer-term yields include:
  - Widening fiscal deficits.
  - Reduced demand for duration by liability-driven investors.
  - Quantitative tightening.
- Despite bouts of upward yield pressures in advanced economies, local currency yields in emerging markets have generally declined, aided by a weaker dollar.

### US dollar, currencies, and capital flows
- The US dollar has weakened considerably since April, although yields in the United States are higher than those in other advanced economies such as the euro area.
- Some investors point to structural factors driving dollar depreciation, including shifts away from US securities, though current data on cross-border capital flows does not suggest a broad-based pullback.
- Increased hedging against dollar weakness resulting from investor concerns about changes in the historical hedging properties of the dollar has contributed to its depreciation in part.
- Whether a switch in the currencies’ perceived risk-hedging properties is temporary or proves longer-lasting remains uncertain.
- Many emerging market currencies have appreciated, and capital inflows have resumed since April, with investors seeing space for some emerging market central banks to ease.

### Selected Economies: Real GDP Growth (Percent change)
- Difference from April 2025 WEO Projections
- Projections: 2023 | 2024 | 2025 | 2026 | 2025 | 2026
- Argentina –1.9 | –1.3 | 5.5 | 4.5 | 0.0 | 0.0
- Australia 2.1 | 1.0 | 1.8 | 2.2 | 0.2 | 0.1
- Brazil 3.2 | 3.4 | 2.3 | 2.1 | 0.3 | 0.1
- Canada 1.5 | 1.6 | 1.6 | 1.9 | 0.2 | 0.3
- China 5.4 | 5.0 | 4.8 | 4.2 | 0.8 | 0.2
- Egypt 2/ 3.8 | 2.4 | 4.0 | 4.1 | 0.2 | –0.2
- France 1.6 | 1.1 | 0.6 | 1.0 | 0.0 | 0.0
- Germany –0.3 | –0.2 | 0.1 | 0.9 | 0.1 | 0.0
- India 2/ 9.2 | 6.5 | 6.4 | 6.4 | 0.2 | 0.1
- Indonesia 5.0 | 5.0 | 4.8 | 4.8 | 0.1 | 0.1
- Iran 2/ 5.0 | 3.5 | 0.6 | 1.1 | 0.3 | 0.0
- Italy 0.7 | 0.7 | 0.5 | 0.8 | 0.1 | 0.0
- Japan 1.4 | 0.2 | 0.7 | 0.5 | 0.1 | –0.1
- Kazakhstan 5.1 | 4.8 | 5.0 | 4.3 | 0.1 | 0.0
- Korea 1.6 | 2.0 | 0.8 | 1.8 | –0.2 | 0.4
- Malaysia 3.5 | 5.1 | 4.5 | 4.0 | 0.4 | 0.2
- Mexico 3.4 | 1.4 | 0.2 | 1.4 | 0.5 | 0.0
- The Netherlands –0.6 | 1.1 | 1.2 | 1.2 | –0.2 | –0.2
- Nigeria 2.9 | 3.4 | 3.4 | 3.2 | 0.4 | 0.5
- Pakistan 2/ –0.2 | 2.5 | 2.7 | 3.6 | 0.1 | 0.0
- Philippines 5.5 | 5.7 | 5.5 | 5.9 | 0.0 | 0.1
- Poland 0.2 | 2.9 | 3.2 | 3.1 | 0.0 | 0.0
- Russia 4.1 | 4.3 | 0.9 | 1.0 | –0.6 | 0.1
- Saudi Arabia 0.5 | 2.0 | 3.6 | 3.9 | 0.6 | 0.2
- South Africa 0.8 | 0.5 | 1.0 | 1.3 | 0.0 | 0.0
- Spain 2.7 | 3.2 | 2.5 | 1.8 | 0.0 | 0.0
- Thailand 2.0 | 2.5 | 2.0 | 1.7 | 0.2 | 0.1
- Türkiye 5.1 | 3.2 | 3.0 | 3.3 | 0.3 | 0.1
- United Kingdom 0.4 | 1.1 | 1.2 | 1.4 | 0.1 | 0.0
- United States 2.9 | 2.8 | 1.9 | 2.0 | 0.1 | 0.3

*This box was prepared by the Monetary and Capital Markets Department’s Global Markets Analysis division. It provides an update on market developments since the April 2025 Global Financial Stability Report.*

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_Source: https://www.imf.org/-/media/files/publications/weo/2025/update/july/english/text.pdf_