## Transcript of World Economic Outlook (WEO) Update, January 2025 _IMF News, January 17, 2025_ ## Source details **Canonical URL:** [Transcript of World Economic Outlook (WEO) Update, January 2025](https://www.imf.org/en/news/articles/2025/01/17/tr011725-january-2025-world-economic-outlook-update) ## Other formats - [Markdown version](/en/news/articles/2025/01/17/tr011725-january-2025-world-economic-outlook-update/index.md) - [Structured JSON version](/en/news/articles/2025/01/17/tr011725-january-2025-world-economic-outlook-update/index.json) - [Bundle manifest](/en/news/articles/2025/01/17/tr011725-january-2025-world-economic-outlook-update/bundle-manifest.json) ## Bibliographic details - Published: January 17, 2025 --- ### Global projections and headline findings - Global growth remains steady at 3.3 percent this year and next. - Global inflation is projected to decline to 4.2 percent this year and 3.5 percent next year. - The recent large global disruptions (Pandemic, the war in Ukraine, and the associated inflation surge) are described as behind us; "This is the end of a cycle and the beginning of a new one." ### Major country and regional outlooks (projections and key points) - United States - Growth expected to be 2.7 percent this year. - Potential policy shifts (fiscal stimulus, deregulation, tariffs, curbs on migration) could raise near-term output and inflation; combined effects likely strengthen the dollar and tighten external financial conditions. - Higher inflation would prevent the Federal Reserve from cutting rates as initially planned. - Euro area - Growth revised downwards and will increase only modestly to 1 percent in 2025. - Risks: low consumer confidence, persistence of high energy prices (especially relative to the United States), weak manufacturing momentum, and fiscal vulnerabilities in some countries. - Tension noted between falling short-term policy rates and rising long-term yields; limited monetary space and low fiscal space could constrain stabilization options. - China - Projected growth of 4.6 percent this year. - Potential downside risks: risk of a debt-deflation trap; decline in Chinese government bond yields indicates rising investor concern. - Longer-term structural trends: potential growth has decreased in line with secular and demographic trends; pivot to more domestically driven growth has not yet occurred. - Japan - Pickup in growth projected to 1.1 percent in 2025 and 0.8 percent in 2026. - Monetary policy: Bank of Japan already tightened in 2024; IMF expects a very gradual further tightening with two more rate hikes in 2025 and two additional rate hikes in 2026. - United Kingdom - Projected growth of 1.6 percent for 2025 (0.1 percentage point upward revision since October). - Factors supporting growth: increased public investment from the October budget, pickup in real incomes and consumption, expected Bank of England easing (about 1 cut per quarter in 2025). - Argentina - Projected growth of 5 percent in 2025 and 5 percent in 2026. - 2024 featured a severe contraction driven by a fiscal consolidation of about 5 percent of GDP and extreme inflation (25 percent month-on-month in December 2023/early 2024 after the peso devaluation). - Recovery drivers: rebound already observed in H2 2024 (Q3 growth 4 percent quarter-on-quarter), rising real wages, increased bank credit, and stabilization efforts. - Recent inflation prints: December inflation about 2.7 percent; November 2.4 percent. - Egypt - Growth forecast revised down to 3.6 in 2025 and to 4.1 in 2026 (downgrades of 0.5 percentage point and 1 percentage point respectively). - Main driver of downgrade: weakened confidence amid foreign exchange restrictions and shortages; recovery expected as FX market conditions and investor sentiment improve, supporting mining and manufacturing activity. - Sub-Saharan Africa - Projected growth of 4.2 in 2025 (unchanged from October) and 4.2 in 2026 (slight downgrade from October). - Key constraints: conflicts, natural disasters, limited financing; vulnerability to tighter global financial conditions and a stronger dollar. - South Africa - Projected growth 1.5 in 2025 and 1.6 in 2026 (largely unchanged from October). - 2024 growth was weaker than expected due to drought-related agricultural decline; recovery expected as electricity reforms advance. - Inflation projected to moderate reflecting monetary policy actions, moderated expectations, lower global oil prices, and a largely closed output gap. - Italy - Growth projected below 1 percent, with 2024 and 2025 downward revisions reflecting weaker outturns, stalled momentum in EU Recovery and Resilience Plan spending, and increased geopolitical risk and policy uncertainty. - Spain - Estimated growth 3.1 percent for 2024 (0.2 percentage point revision) and 2.3 percent for 2025 (0.2 percentage point upward revision). - Strength from robust exports including record tourism revenues, employment gains, gradual decline in household saving rate, resilient financial system, large current account surplus, and lower fiscal deficit. - Russia - Slight upward revision for 2025 to 1.4 percent; sharp slowdown from estimated 2024 growth of 3.8 percent. - 2024 inflation 8.3 percent; sequential inflation above 9 percent. - Policy response: Central Bank of Russia hiked interest rates to 21 percent; high rates will weigh on activity. ### Trade, productivity, and structural observations - Global trade: slight downward revision for 2025–2026 linked to elevated trade policy uncertainty and potential new rounds of trade tensions; trade-to-GDP has remained relatively stable in recent years. - Productivity divergence: the United States has experienced persistently stronger productivity growth than Europe, notably in the technology sector. Structural factors in the EU include resource misallocation, lower business dynamism, a deficit of scalable startups, and an overabundance of low-growth mature firms. - Policy implication: completing single market integration (capital, competition, cross-border scaling) and ambitious structural reforms are important to boost productivity and growth. ### Risks and scenarios highlighted - Elevated economic policy uncertainty due to likely policy shifts from newly elected governments in 2024. - Near-term risks (country-specific): - Euro area: greater-than-expected slowdown from weak manufacturing and fiscal vulnerabilities. - China: downside risk of debt-deflation dynamics and rising investor concern in bond markets. - United States: demand-stimulating policies (fiscal stimulus, confidence boom) could raise near-term output and inflation; supply-constraining policies (tariffs, migration curbs) could lower output and raise prices. Net near-term effect on output uncertain but assessed as likely upward; price pressures likely to increase. - Medium-term risks (more uniformly to the downside): - Curbs on migration and protectionist policies reducing potential output. - Fiscal expansions raising public debt and creating fiscal vulnerabilities. - Deregulation potentially boosting output but also raising financial vulnerabilities and the risk of boom-bust dynamics. - Inflation expectations: - While inflation expectations remained well anchored during the recent inflation episode, there is a risk that renewed price pressures could erode central banks’ credibility and de-anchor expectations, complicating disinflation. ### Policy recommendations and priorities - Monetary policy: central banks should remain vigilant and be ready to act forcefully if inflation breaks out again; also monitor and manage financial stability risks. - Fiscal policy: restore fiscal buffers now, while preserving growth; delaying needed adjustments in a low-growth, high-interest-rate environment risks market loss of confidence and added fiscal pressures. - Structural reforms: pursue ambitious reforms to improve resource allocation, increase government revenues, foster innovation and competition, and strengthen multilateral institutions to support a more resilient and sustainable global economy. - On limited monetary space and high long-term yields: countries should use fiscal policy prudently to stabilize economies when monetary policy is constrained, but high long-term yields limit fiscal space—underscoring the need to rebuild buffers. *Transcript of World Economic Outlook (WEO) Update, January 17, 2025 — IMF Communications Department* --- ## References - [Arab Republic of Egypt and the IMF](http://www.imf.org/external/country/EGY/index.htm) - [Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm) - [Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm) - [South Africa and the IMF](http://www.imf.org/external/country/ZAF/index.htm) - [Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm) - [United States and the IMF](http://www.imf.org/external/country/USA/index.htm) - [Transcripts](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2025/01/17/tr011725-january-2025-world-economic-outlook-update_