China has largest upward revision in IMF's new forecasts

China received the largest upward revision in the International Monetary Fund's latest forecast, with "stronger-than-expected" economic activity in early 2025 expected to drive its annual growth to 4.8 percent, up from an earlier prediction of 4.0 percent.

The IMF on Tuesday modestly raised its global growth forecasts for 2025 and 2026, citing stronger-than-expected activity in key economies and a recent easing of trade tensions between the United States and China.

Just hours after the IMF news conference, China and the U.S. announced in Stockholm, Sweden, that they had agreed to seek an extension of the tariff pause deadline after two days of discussions.

The IMF warned that risks remain. A potential rebound in tariff levels, geopolitical tensions and fiscal imbalances, particularly in high-debt economies, could tighten global financial conditions and drag down future growth.

In its updated World Economic Outlook, the IMF projected global GDP to grow 3.0 percent in 2025 and 3.1 percent in 2026, reflecting upward revisions of 0.2 and 0.1 percentage points, respectively, from its April forecast. Still, the figures fall short of the 3.3 percent forecast issued in January and remain well below the pre-pandemic average of 3.7 percent.

Among major economies, emerging market and developing economies are now expected to grow 4.1 percent in 2025, up 0.4 percentage points from the April projection, while advanced economies are forecast to grow 1.5 percent, slightly above the previous 1.4 percent estimate.

"This is coming in part from a very strong first quarter that we see for China's economic activity, with a particularly important component, which was the strength of exports from China to other parts of the world, the EU area, Asia and other countries," Pierre-Olivier Gourinchas, IMF chief economist, said at a news conference in Washington.

Growth forecasts were also revised upward for the United States, Europe, Japan, Britain, Canada, India, Brazil, Mexico, Saudi Arabia and Nigeria.

A key factor behind China's improved outlook, Gourinchas said, was the easing of trade tensions with the U.S. following a bilateral agreement announced in May that helped reduce tariff rates.

"And the expectation that this level of tariff will remain at the lower level is certainly supporting China's economic activity going forward," he said.

The IMF stressed that the global outlook remains clouded by policy uncertainty, with trade policy identified as a major vulnerability.

"The world economy is still hurting, and it's going to continue hurting with tariffs at that level, even though it's not as bad as it could have been," Gourinchas said.

"Despite these welcome developments, tariffs remain historically high and global policy remains highly uncertain, with only a few countries having reached fully fleshed out trade agreements," he added.

"This modest decline in trade tensions, however fragile, has contributed to the resilience of the global economy so far," he said, adding that "concerns about future tariffs led to a strong surge in exports to the U.S. in the first quarter."