On July 29, the International Monetary Fund (IMF) released its latest World Economic Outlook update, significantly raising growth forecasts for emerging and developing economies. The revision reflects stronger-than-expected performance from China and progress in global trade negotiations.
According to the updated report, the IMF now expects GDP growth for emerging and developing economies to reach 4.1% in 2025, up from its previous forecast of 3.7%. For 2026, growth is projected at 4.0%, slightly higher than the earlier estimate of 3.9%.
The primary driver behind this upward revision is the more robust economic recovery in China, the world’s second-largest economy. The IMF forecasts that China’s GDP will grow 4.8% in 2025, significantly higher than its previous projection of 4.0%. In Q2/2025 alone, China recorded a strong 5.2% growth rate.
A key factor supporting China’s improved outlook is the easing of tariffs in its trade relationship with the United States. According to the IMF, the reduction in tariffs is expected to support manufacturing, exports, and global supply chains.
The new projections are based on an updated assumption that U.S. tariffs on Chinese goods will average 17.3% in 2025, down from 24.4% used in the IMF’s April forecast.
IMF officials noted that this adjustment reflects "stronger-than-expected economic activity in the first half of 2025" and positive developments in U.S.-China trade negotiations, which are currently ongoing in Stockholm. The two nations are facing an August 12 deadline to finalize a comprehensive trade deal, following preliminary agreements reached in May and June.
Despite the improved numbers, the IMF warned that downside risks remain. Trade tensions could re-escalate or policy shifts could derail recovery if not managed carefully.
"Risks to the outlook are tilted to the downside," said Pierre-Olivier Gourinchas, Chief Economist and Director of the IMF’s Research Department. He added that China's continued reliance on exports and ongoing trade policy uncertainty could expose its economy to vulnerabilities.
Globally, the IMF now projects GDP growth at 3.0% for 2025 and 3.1% for 2026, indicating a modest recovery. However, these figures remain below the organization’s January 2025 forecast, suggesting the recovery is still fragile.
Some countries are expected to face weaker growth than previously anticipated. For instance, Russia’s growth forecast has been cut to 0.9% in 2025 from 1.5%, and South Korea’s GDP growth is now projected at 0.8%, down from 1.0%.
Beyond China, the United States is also pursuing new trade agreements with other partners such as the European Union (EU) and Japan. The IMF stated that it is closely reviewing the details of these agreements to assess their economic impact.
Mr. Gourinchas noted that the agreements announced so far are “high-level frameworks” that still require formalization. However, he pointed out that the agreed tariff levels appear to align with those used in the IMF’s current economic modeling.
From an investment standpoint, the IMF’s revised outlook highlights renewed opportunities in emerging markets, especially in Asia. The easing of trade barriers and stronger-than-expected growth in China could benefit global investors targeting sectors such as manufacturing, logistics, and finance.
Still, the global investment landscape remains complex, with ongoing geopolitical tensions, fluctuating interest rates, and divergent monetary policies across regions. Diversification and risk management remain crucial strategies for navigating opportunities in emerging economies through 2025 and beyond.
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