The International Monetary Fund (IMF) has revised its global economic growth forecast upward for 2026, projecting an increase to 3.1% from the previous estimate of 3% for this year. This adjustment reflects earlier-than-expected economic activity ahead of potential tariff increases, lower effective tariff rates, improved financial conditions, and fiscal expansion in several major economies.
IMF Chief Economist Pierre-Olivier Gourinchas noted that the United States has partially reduced its effective tariff rates, bringing them down to approximately 17% from 24%. However, he warned that tariffs remain historically elevated, and global trade policy remains uncertain, with few nations having finalized comprehensive trade agreements.
The IMF report also highlighted that U.S. inflation remains relatively high, with early signs that consumers are absorbing the increased costs. Meanwhile, China’s economy is expected to grow by 4.8%.
British Chancellor of the Exchequer Rachel Reeves commented that the IMF’s forecast demonstrates the UK’s position as the fastest-growing economy among G7 nations in Europe, despite global economic challenges. She emphasized the UK government’s commitment to unlocking economic potential through investments in transportation, affordable housing, and major infrastructure projects like Sizewell C.
Despite the positive outlook, the IMF has issued warnings about potential risks. A resurgence in tariff rates could dampen global growth, and the expiration of deadlines for additional tariffs without substantial agreements could increase economic uncertainty. However, successful trade negotiations that establish a predictable framework and reduce tariffs could boost global growth.
The report also noted that recent U.S. legislation led by President Donald Trump has provided some clarity on fiscal matters but has introduced concerns about long-term fiscal sustainability. IMF projections indicate that the new law could increase the U.S. national deficit by 1.5% of next year’s GDP.
On the trade front, President Trump recently announced a 15% tariff on most exports from the 27-member European Union, down from the initially proposed 30%.
The IMF emphasized that restoring confidence, predictability, and sustainability in global economic policy remains a top priority.
— news from upi.com
— News Original —
IMF ups global economic outlook after lower tariffs but warns of risk
July 29 (UPI) — The International Monetary Fund said Monday that global economic growth will be better than expected despite a slowdown in the U.S. economy over fluctuating tariffs imposed by President Donald Trump.
The U.S.-based IMF ‘s world outlook projects global growth to jump in 2026 to 3.1% from 3% this year in an “upward revision” from April ‘s World Economic Outlook.
“This reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions and fiscal expansion in some major jurisdictions,” IMF officials wrote in the economic outlook update report.
IMF Chief Economist Pierre-Olivier Gourinchas said the United States had only “partly reversed course” in lowering its effective tariff rates to about 17% from 24%.
Economists pointed to currently higher U.S. inflation and “tentative” signs that consumers are covering the difference, while China ‘s economy is forecast to see 4.8% growth.
“Despite these welcome developments, tariffs remain historically high,” he added. “And global policy remains highly uncertain, with only a few countries having reached fully fleshed-out trade agreements.”
British Chancellor of the Exchequer Rachel Reeves said the IMF ‘s forecast showed that Britain remained “the fastest-growing European economy in the G7 despite the global economic challenges we are facing.”
“However, I am determined to unlock Britain ‘s full potential,” Reeves told The Guardian, adding that the British government was “investing billions of pounds through our plan for change — in jobs through better city region transport, record funding for affordable homes, as well as backing major projects like Sizewell C.”
However, the IMF warned of other economic risks.
The IMF report said a rebound in effective tariff rates “could lead to weaker growth.”
“Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements,” it said.
But global growth “could be lifted if trade negotiations lead to a predictable framework and to a decline in tariffs.”
IMF officials noted that U.S. President Donald Trump ‘s GOP-led signature legislation passed earlier this month did bring some clarity to America ‘s fiscal health, but it “added to uncertainty about longer-term fiscal sustainability” with IMF estimates projecting the new law will up the national deficit by 1.5% of next year ‘s GDP.
On Sunday, Trump announced 15% tariffs on most of the 27-member European Union ‘s exports down from the threatened 30%.
But according to the IMF ‘s outlook report, restoring confidence, predictability and sustainability “remains a key policy priority.”