WASHINGTON — The International Monetary Fund expects the world economy to grow a little faster and inflation to keep falling this year.
But it warned that the outlook is clouded by President Donald Trump’s promises to slash U.S. taxes, impose tariffs on foreign goods, ease regulations on businesses and deport millions of immigrants working illegally in the United States.
The Washington, D.C.-based lending agency expects the world economy to grow 3.3 percent this year and next, up from 3.2 percent in 2024.
The growth is steady but unimpressive: From 2000 to 2019, the world economy grew faster — an average of 3.7 percent a year. The sluggish growth reflects the lingering effects of big global shocks, including the pandemic and Russia’s invasion of Ukraine.
The IMF is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty.
Global inflation, which had surged after the COVID-19 pandemic disrupted global supply chains and caused shortages and higher prices, is forecast to fall from 5.7 percent in 2024 to 4.2 percent this year and 3.5 percent in 2026.
But in a blog post that accompanied the release of the IMF’s latest World Economic Outlook report, the fund’s chief economist, Pierre-Olivier Gourinchas, wrote that the policies Trump has promised to introduce “are likely to push inflation higher in the near term.”
Big tax cuts could overheat the U.S. economy and inflation. Likewise, hefty tariffs on foreign products could at least temporarily push up prices and hurt exporting countries around the world. And mass deportations could cause restaurants, construction companies and other businesses to run short of workers, pushing up their costs and weighing on economic growth.
Gourinchas also wrote that Trump’s plans to slash regulations on business could “boost potential growth in the medium term if they remove red tape and stimulate innovation.” But he warned that “excessive deregulation could also weaken financial safeguards and increase financial vulnerabilities, putting the U.S. economy on a dangerous boom-bust path.”
Trump, who was inaugurated Monday, inherits a strong U.S. economy. The IMF expects U.S. growth to come in at 2.7 percent this year, a hefty half percentage point upgrade from the 2.2 percent it had forecast in October.
The American economy — the world’s biggest — is proving resilient in the face of high interest rates, engineered by the Federal Reserve to fight inflation. The U.S. is benefiting from a strong job market that gives consumers the confidence and financial wherewithal to keep spending, from strong gains in productivity and from an influx of immigrants that has eased labor shortages.
The U.S. economy’s unexpectedly strong performance stands in sharp contrast to the advanced economies across the Atlantic Ocean. The IMF expects the 20 countries that share the euro currency to collectively grow just 1 percent this year, up from 0.8 percent in 2024 but down from the 1.2 percent it was expecting in October.
“Headwinds,” Gourinchas wrote, “include weak momentum, especially in manufacturing, low consumer confidence, and the persistence of a negative energy price shock” caused by Russia’s invasion of Ukraine.
The Chinese economy, No. 2 in the world, is forecast to decelerate — from 4.8 percent last year to 4.6 percent in 2025 and 4.5 percent in 2026. A collapse in China’s housing market has undermined consumer confidence. If government doesn’t do enough to stimulate the economy with lower interest rates, stepped-up spending or tax cuts, the nation “is at risk of a debt-deflation stagnation trap,” Gourinchas warned, in which falling prices discourage consumers from spending (because they have an incentive to wait to get still better bargains) and make it more expensive for borrowers to repay loans.
The IMF forecasts came out a day after its sister agency, the World Bank, predicted global growth of 2.7 percent in 2025 and 2026, same as last year and 2023.
The bank, which makes loans and grants to poor countries, warned that the growth wasn’t sufficient to reduce poverty in low-income countries. The IMF’s global growth estimates tend to be higher than the World Bank’s because they give more weight to faster-growing developing countries.