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IMF Nudges up 2025 Growth Forecast but Says Tariff Risks Still Dog Outlook

The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. (AFP)
The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. (AFP)
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IMF Nudges up 2025 Growth Forecast but Says Tariff Risks Still Dog Outlook

The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. (AFP)
The International Monetary Fund (IMF) logo is displayed outside its headquarters in Washington, DC, on October 8, 2022. (AFP)

The IMF on Tuesday raised its global growth forecasts for 2025 and 2026 slightly, citing stronger-than-expected purchases ahead of an August 1 jump in US tariffs and a drop in the effective US tariff rate to 17.3% from 24.4%. But it warned that the global economy faced major risks including a potential rebound in tariff rates, geopolitical tensions and larger fiscal deficits that could drive up interest rates and tighten global financial conditions.

"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," said Pierre-Olivier Gourinchas, chief economist at the International Monetary Fund.

In an update to its World Economic Outlook from April, the IMF raised its global growth forecast by 0.2 percentage point to 3.0% for 2025 and by 0.1 percentage point to 3.1% for 2026. That is still below the 3.3% growth it had projected for both years in January and the pre-pandemic historical average of 3.7%, however.

It said global headline inflation was expected to fall to 4.2% in 2025 and 3.6% in 2026, but noted that inflation would likely remain above target in the United States as tariffs passed through to US consumers in the second half of the year.

The US effective tariff rate - measured by import duty revenue as a proportion of goods imports - has dropped since April, but remains far higher than its estimated level of 2.5% in early January. The corresponding tariff rate for the rest of the world is 3.5%, compared with 4.1% in April, the IMF said.

US President Donald Trump has upended global trade by imposing a universal tariff of 10% on nearly all countries from April and threatening even higher duties to kick in on Friday. Far higher tit-for-tat tariffs imposed by the US and China were put on hold until August 12, with talks in Stockholm this week potentially leading to a further extension.

The US has also announced steep duties ranging from 25%-50% on automobiles, steel and other metals, with higher duties still pending on pharmaceuticals, lumber, and semiconductor chips.

Such future tariff increases are not reflected in the IMF numbers, and could raise effective tariff rates further, create bottlenecks and amplify the effect of higher tariffs, the IMF said.

SHIFTING TARIFFS

Gourinchas said the IMF was carefully evaluating new US deals reached with the European Union and Japan over the past week, which came too late to factor into the July forecast.

"We'll have to see whether these deals are sticking, whether they're unraveled, whether they're followed by other changes in trade policy," he said.

Tariffs agreed so far in those deals were similar to the effective US tariff rate on which the IMF based its latest assumptions, he added.

Staff simulations showed that global growth in 2025 would be roughly 0.2 percentage point lower if the maximum tariff rates announced in April and July were implemented, the IMF said.

The IMF said the global economy was proving resilient for now, but uncertainty remained high and economic activity being recorded pointed to "distortions from trade, rather than underlying robustness."

Gourinchas said the 2025 outlook had been helped by what he called "a tremendous amount" of front-loading as businesses tried to get ahead of the tariffs, but he warned that the stock-piling boost would not last.

"That is going to fade away," he said, adding: "That's going to be a drag on economic activity in the second half of the year and into 2026. There is going to be pay-back for that front loading, and that's one of the risks we face."

Tariffs were expected to remain high, he said, pointing to signs that US consumer prices were starting to edge higher.

"The underlying tariff is much higher than it was back in January, February. If that stays, and there are indications that it will stay at a level that is around what we are projecting, that will weigh on growth going forward, contributing to a really lackluster global performance."

One unusual factor has been a depreciation of the dollar, not seen during previous trade tensions, Gourinchas said, noting that the lower dollar was adding to the tariff shock for other countries, while also helping ease financial conditions.

US growth was expected to reach 1.9% in 2025, up 0.1 percentage point from April's outlook, edging up to 2% in 2026. A new US tax cut and spending law was expected to increase the US fiscal deficit by 1.5 percentage points, with tariff revenues offsetting that by about half, the IMF said.

It lifted its forecast for the euro area by 0.2 percentage point to 1.0% in 2025, and left the 2026 forecast unchanged at 1.2%. The IMF said the upward revision reflected a historically large surge in Irish pharmaceutical exports to the United States; without it, the revision would have been half as big.

China's outlook got a bigger upgrade of 0.8 percentage point, reflecting stronger-than-expected activity in the first half of the year, and the significant reduction in US-China tariffs after Washington and Beijing declared a temporary truce.

The IMF increased its forecast for Chinese growth in 2026 by 0.2 percentage point to 4.2%.

Overall, growth is expected to reach 4.1% in emerging markets and developing economies in 2025, edging lower to 4.0% in 2026, it said.

The IMF revised its forecast for world trade up by 0.9 percentage point to 2.6%, but cut its forecast for 2026 by 0.6 percentage point to 1.9%.

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Business

Gold Heads for Weekly Loss as High Oil Prices Feed inflation worries

A jeweller holds gold bars in Cairo, Egypt, March 9, 2026. (Reuters)
A jeweller holds gold bars in Cairo, Egypt, March 9, 2026. (Reuters)
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Gold Heads for Weekly Loss as High Oil Prices Feed inflation worries

A jeweller holds gold bars in Cairo, Egypt, March 9, 2026. (Reuters)
A jeweller holds gold bars in Cairo, Egypt, March 9, 2026. (Reuters)

Gold prices fell more than 1% on Friday and were headed for a weekly loss of a similar magnitude, as elevated oil prices continued to fan inflation concerns that would discourage central banks from cutting interest rates.

Spot gold was down 1.1% at $4,573.33 per ounce at 1149 GMT, and on track for a weekly loss of 2.8%. US gold futures for June delivery fell 1% to $4,585.20.

"Gold remains negatively correlated to oil in the short term, as it impacts interest rate expectations," said UBS analyst Giovanni Staunovo.

Iran said on Thursday it would respond with "long and painful strikes" on US positions if Washington renewed attacks, reiterating its claim to the Strait of Hormuz, Reuters reported.

Brent crude prices have touched double the levels seen at the start of the year, raising concerns about a global economic slowdown and higher inflation as fuel prices surge.

US inflation accelerated in March as the war raised gasoline prices, reinforcing expectations that the Federal Reserve could keep interest rates on hold well into next year.

The European Central Bank and the Bank of England left interest rates unchanged on Thursday, following similar decisions this week by the Fed and the Bank of Japan.

Gold, traditionally seen as a hedge against geopolitical uncertainty and inflation, can come under pressure in a high interest rate environment as it loses its appeal to yield-bearing assets like US Treasuries.

However, Staunovo said UBS retained a constructive outlook over the next six to 12 months.

"Uncertainty surrounding upcoming (US) midterm elections, expectations of a weaker US dollar over time, and declining real interest rates (as the Fed cuts) will likely support investment demand alongside continued central bank demand," he said.

He added that these factors could drive prices towards $5,900/oz by late 2026.

Spot silver prices fell 0.3% to $73.53 per ounce, platinum was down 0.5% at $1,975.65, and palladium lost 0.1% to $1,522.18.

Business

Iran’s Monthslong Internet Shutdown Is Crushing Businesses in an Already Battered Economy

A man uses his smartphone while riding the subway in Tehran, Iran, Tuesday, Dec. 24, 2024. (AP)
A man uses his smartphone while riding the subway in Tehran, Iran, Tuesday, Dec. 24, 2024. (AP)
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Iran’s Monthslong Internet Shutdown Is Crushing Businesses in an Already Battered Economy

A man uses his smartphone while riding the subway in Tehran, Iran, Tuesday, Dec. 24, 2024. (AP)
A man uses his smartphone while riding the subway in Tehran, Iran, Tuesday, Dec. 24, 2024. (AP)

At her studio in Iran's capital, Amen Khademi prepared a fashion shoot for a jacket she designed with Persian-inspired motifs. But even as she applied lipstick to the model, she was distracted, worrying if her business would survive after four months without its main link to customers — the internet.

Iran's 90 million people have been cut off from the internet for most of 2026, one of the world's longest and strictest national shutdowns. That is devastating an online economy that had long defied government restrictions and international sanctions. From fashion to fitness, to advertising and retailers, many have seen their incomes evaporate.

Khademi hasn't made a sale in months. “The internet outage in the past four months has completely destroyed not only my business, but many online businesses," she said.

Despite an uneasy truce with the US and Israel, Iran’s rulers have refused to reverse the shutdown they have depicted as a wartime necessity. But they are facing an outcry as it adds to mass job losses from strikes on key industries and an ongoing US blockade.

Before January, Iranians could access the internet, but authorities blocked a large amount of content. Now all access to the global web has been shut down. Some workarounds exist, but they have become enormously expensive, out of reach for most Iranians.

The internet cutoff costs the economy an estimated $30-40 million daily, with indirect losses likely twice that much, a member of Iran’s Chamber of Commerce, Afshin Kolahi, told a local newspaper. About 10 million people have jobs that depend on internet connectivity, according to the communications minister, Sattar Hashemi.

An unprecedented shutdown guts an online economy

Throughout years of economic turmoil in Iran brought on by sanctions and mismanagement, platforms like Instagram and WhatsApp helped small businesses to find customers, and people to earn extra income to afford skyrocketing prices for basic goods.

Iranian authorities first shut down the internet in January during mass anti-government protests. That cutoff was just starting to ease when the government imposed a complete internet blackout on Feb. 28 as the US and Israel launched the war.

Mahsa Alimardani, an expert on internet censorship, said Kashmir and Myanmar have had longer blocks affecting specific regions or platforms. Countries like China, with its “Great Firewall,” and North Korea, have always strictly limited access to the global internet.

Fashion designer Amen Khademi works on her laptop with model Farnaz Ojaghloo, left, at her studio in Tehran, Iran, Thursday, April 23, 2026. (AP)

“What makes Iran’s shutdown unprecedented is the combination of scale and severity: an entire country of 90 million people with a developed digital economy deliberately reverted to a controlled national intranet,” said Alimardani, an associate director for technology threats and opportunities at the rights group Witness.

A flagship company of Iran’s digital economy, online retailer DigiKala, recently said it was laying off 200 people, about 3% of its workforce. The pain extends to “production, foreign trade and even traditional business,” Reza Olfatnasab, head of a national group representing digital businesses, said in comments published in Iranian media.

Khademi's shopfront is Instagram. But her studio’s page — with more than 30,000 followers — is now inactive. She was doing the photo shoot to save the pictures for later, hoping to find an alternative.

Her model, Farnaz Ojaghloo, is also a fitness coach. The shutdown has dried up both her modeling gigs and the online courses she ran for people inside Iran and abroad.

“Psychologically, it really hits hard,” Ojaghloo said. “All the plans you had for six months or a year ahead get pushed aside, and your only concern becomes surviving in the moment.”

The alternatives are ‘terrible’

For years, authorities in Iran have enforced filters and policed content on platforms like YouTube and Instagram. But before the war, Iranians could bypass restrictions with cheap virtual private networks, known as VPNs, and other easy workarounds.

Now, the shutdown has stoked high prices for black-market VPNs. Iranian state media routinely report arrests of people for using illegal VPNs or the American satellite system Starlink, which was banned last year.

Senior government officials are awarded “white” SIM cards granting them access to the global internet. Under pressure to alleviate the economic harm, the government is now allowing less-restricted internet access to a small number of professions, business and media.

An e-commerce trade group in Tehran condemned the tiered system in Iranian media on Wednesday, calling it “an abuse of an obvious need of every citizen.” It said the outage threatens “the destruction of the country’s infrastructure at the hands of our own decision-makers.”

The vast majority of people have no choice but Iran’s national net.

Two women use a smartphone in northern Tehran, Iran, Sept. 28, 2025. (AP)

A Tehran resident who works in advertising said sponsors have little interest in paying for content that can’t be posted on major platforms like Instagram, where he has tens of thousands of followers. He said his income is down to near zero since the war began.

A gamer in Isfahan — also with a large following on YouTube and Instagram — said Iran’s domestic net “is terrible” — slow, insecure and full of bugs. He too has lost almost all his income from sponsors and donations.

Iran has its own social media platforms modeled on services like WhatsApp and YouTube, but content is closely monitored and often censored.

“Nobody really wants to use these platforms, but there is no other option,” the gamer said. Both he and the advertising worker spoke on condition of anonymity out of security concerns.

A growing number of street vendors

The shutdown has piled new pressures on Iran’s once large and educated middle class, already struggling in the face of a prewar currency crash.

Economic decline in Iran has spurred waves of anti-government protests, most recently in December. Now, more Iranians are thinking of emigrating, a software developer said.

The developer — likewise speaking on condition of anonymity out of safety fears — said the internet shutdown has wiped out remote work. He lost his own job when his former company laid off almost all its employees in recent weeks, he said.

The consequences are visible in the rising numbers of street peddlers in Tehran. Reza Amiri, a 32-year-old former employee of an internet provider, now sells hats and umbrellas by a metro stop. He lost his job after the war started and has not received his last month’s salary, he said.

Monireh Pishgahi sells ornaments and accessories on the capital’s famed Vali Asr Street. She said her tailoring business used to supply three online shops. As business dried up, she shut down and laid off her five employees.

One downtown shopkeeper, Mohammad Rihai, said he had given up on trying to persuade street vendors to stop blocking the sidewalk outside his store. “After the war, you see them all along the sidewalk. I cannot fight them anymore.”

Business

EU-Mercosur Trade Deal Takes Provisional Effect, Boosting Hopes for Millions

Brazil's Vice President Geraldo Alckmin during a meeting with foreign media at the Planalto Palace in Brasilia, Brazil, April 22, 2026. REUTERS/Jorge Silva
Brazil's Vice President Geraldo Alckmin during a meeting with foreign media at the Planalto Palace in Brasilia, Brazil, April 22, 2026. REUTERS/Jorge Silva
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EU-Mercosur Trade Deal Takes Provisional Effect, Boosting Hopes for Millions

Brazil's Vice President Geraldo Alckmin during a meeting with foreign media at the Planalto Palace in Brasilia, Brazil, April 22, 2026. REUTERS/Jorge Silva
Brazil's Vice President Geraldo Alckmin during a meeting with foreign media at the Planalto Palace in Brasilia, Brazil, April 22, 2026. REUTERS/Jorge Silva

The long-awaited trade deal between South American bloc Mercosur and the European Union took effect Friday, at least provisionally. The initiative creates a trans-Atlantic market estimated at $22 trillion with 720 million potential consumers, and some nations expect to boost their exports by more than 10% by 2038, once it is fully implemented.

The trade deal was signed Jan. 17 at a meeting of the South American group. European Commission President Ursula von der Leyen's move to provisionally enact the deal, effectively sidestepping the EU Parliament, is being challenged by EU lawmakers at the bloc’s judiciary. The agreement will be halted if the European body rules against it.

“This is good news for EU businesses of all sizes, good news for our consumers and good news for our farmers, who will gain valuable new export opportunities, with full protection for sensitive sectors,” she said Thursday.

Von der Leyen is expected to hold a videoconference Friday with leaders of Mercosur nations Brazil, Argentina, Uruguay, and Paraguay to celebrate the agreement.

Earlier this week, Brazil’s President Luiz Inácio Lula da Silva, one of the key supporters of the agreement, signed a decree validating the deal in his country. He said it is a response to unilateral tariffs imposed last year by US President Donald Trump and a reaffirmation of multilateralism.

“Nothing better than believing in the exercise of democracy, in multilateralism, and in cordial relations between nations,” Lula said in a ceremony in the capital, Brasilia, to celebrate the milestone after more than 25 years of negotiations.

Last week, Brazil's vice president and one of the negotiators of the deal, Geraldo Alckmin, said in an interview with The Associated Press and other news agencies that not striking the deal with the EU would have meant staying behind while competitor nations made other agreements.

Brazil is by far Mercosur’s largest economy, with a gross domestic product estimated at over $2.3 trillion in 2025.

Lia Valls, an associate researcher at the think-tank Fundacao Getulio Vargas based in Rio de Janeiro, agrees that the deal offers better perspectives against unilateralism worldwide.

“The EU and Mercosur are showing that it is possible for big blocs to reach a deal in this world where that multilateral system is being very weakened and where the US clearly operates to do that,” Valls told the AP. “It is a very positive sign.”

The agreement faced opposition from European farmers and environmental groups and was delayed in December, before being referred to the EU’s top court.

South American agribusiness industries, chiefly beef, fruit and minerals, are expecting a boost in exports to Europe. European automakers, pharmaceutical companies and technology firms also look forward to making new inroads in Mercosur markets.

While companies based in Mercosur countries have expressed fear of tough competition from European peers in hi-tech industries, European farmers have shown concerns about price pressures and imports that do not follow similar environmental standards.

French President Emmanuel Macron, one of the critics of the deal, has long demanded safeguards to monitor and stop large economic disruption in the EU, increased regulations in the Mercosur nations like pesticide restrictions, and more inspections of imports at EU ports.

The agreement gradually removes trade barriers and tariffs in the two blocs, but it also keeps economic safeguard clauses for European countries to protect some sectors from excessive competition, such as poultry, beef, sugar, and fruit.