Following yesterday's forecasts from the Bank of Canada, this edition of Twenty-Four examines the economic outlook recently released by the International Monetary Fund (IMF).

The current global economic landscape is significantly shaped by tariffs, which have become a new reality. Beyond trade, other substantial risks include supply chain disruptions, stemming from geopolitical tensions in the Middle East and Ukraine, and the economic impact of rising public debt in several major countries.

However, global output forecasts have improved since April due to a de-escalation of U.S. tariff threats, a surge in pre-tariff activity, and better global financial conditions. It is crucial to acknowledge that this resilience could fade if trade agreements are not quickly finalized and the short-term boost from front-loaded activity diminishes.

The IMF reiterated the ongoing prevalence of global downside risks, a sentiment echoed by the U.S. administration's recent imposition of 50% tariffs on certain copper products. This move, announced yesterday, coincidentally aligns with the IMF's mention of 50% copper tariffs as an example of trade policy risks.

Global GDP growth is now projected to be 3% in 2025 and 3.1% in 2026, an increase of 0.2 and 0.1 percentage points (pp) for each year, respectively, from the previous April iteration.

While these updated projections are positive, they still fall short of the 3.3% growth anticipated for both years before President Trump took office in January, and the historical average of 3.7% growth experienced prior to COVID.

The U.S. economy, representing 15% of global output, is now forecast to grow by 1.9% (up 0.1 pp from April) in 2025 and 2% (up 0.3 pp from April) in 2026. The upgrades are primarily due to a lower effective tariff rate, which has decreased to 17.3% from the April forecast of 24.4%. While this revision seems positive, it pales in comparison to the pre-Trump 2.0 January projections, which anticipated 2.7% growth for the U.S. this year.

China's economic growth forecast has also been upgraded, with an expected expansion of 4.8% in 2025 and 4.2% in 2026. This positive adjustment is partly due to the front-loading impacts of tariffs and stronger-than-expected economic activity in the first half of the year.

Closer to home, Canada's economic outlook has improved, with a forecast of 1.6% in 2025 (up 0.2 pp from April) and 1.9% in 2026 (a 0.3 pp increase from April). These revised estimates exceed both the Bank of Canada and our own forecasts of just over 1%, which align well with data released this morning that shows that Canadian GDP is expected to remain largely unchanged in the second quarter of 2025.

Answer to the previous trivia question: Founded in 1668, Sveriges Riksbank or the central bank of Sweden is the world’s oldest central bank.

Today’s trivia question: When was the IMF established and how many member-countries does it have?