Lower-than-expected tariffs and weaker USD prop up IMF’s global growth outlook

The IMF revises global growth forecast upwards: The International Monetary Fund (IMF) now forecasts global growth to reach 3.0% in 2025, a 0.2 percentage point upgrade from its previous estimate in April, it said in its latest World Economic Outlook report (pdf). The fund expects growth to slightly accelerate to 3.1% in 2026, revising up its previous estimate by 0.1 percentage point.

Behind the upgrade: The upward revision came on the back of stronger-than-expected front-loading of economic activity by firms and households in anticipation of higher tariffs, the fund said. The revision is also supported by lower average US tariff rates than were initially assumed in April. “At the time of the April forecast we had an effective tariff rate of 24%. We’re now looking at an effective tariff rate of 17%, [...] still much higher than where we were in January,” IMF’s chief economist Pierre-Olivier Gourinchas told the Financial Times.

A weaker USD had also helped the outlook: The USD is down by some 9% in the year-to-date against a basket of currencies including the EUR and the GBP, mainly due to the trade war and attacks on the Federal Reserve, Gourinchas added.

Major economies saw modest upgrades: The IMF now expects the US to grow 1.9% in 2025, a 0.1 percentage point upgrade from the previous forecast. Meanwhile, Japan’s 2025 growth was revised up by 0.1 percentage point to 0.7%. The fund also upgraded its forecast for Canada’s growth by 0.2 percentage points to 1.6% and for the UK by 0.1 percentage point to 1.2%.

China and India also see stronger outlooks: China’s 2025 outlook got a significant upgrade by 0.8 percentage points to 4.8%, reflecting stronger-than-expected activity in the first half of the year and a significant reduction in US-China tariffs. Meanwhile, India’s growth forecast was revised slightly upward to 6.4% for both 2025 and 2026 due to a more benign external environment.

Across the Atlantic: Growth in the Eurozone is now projected at 1.0% in 2025, an upward revision of 0.2 percentage points, mainly driven by a strong GDP outturn in Ireland, which was boosted by front-loading of pharma exports to the US. The IMF projects 1.2% growth for the area in 2026, unchanged from April.

Trade distortions cloud the picture: Global trade volumes are now expected to grow 2.6% in 2025, a 0.9 percentage point upgrade from April, due to the front-loading of trade flows ahead of anticipated restrictions. However, this effect is expected to fade, with a "payback" materializing through 2026, leading to a 0.6 percentage point downgrade in the 2026 trade volume forecast, where it’s expected to log 1.9% increase, the fund said.

A hazy horizon: The IMF warns that the outlook is marked by "tenuous resilience amid persistent uncertainty," with risks tilted to the downside. An escalation of protectionist measures could dampen global growth. However, growth prospects could improve if trade negotiations lead to a predictable framework and a decline in tariffs.

The inflation outlook: Global headline inflation is expected to continue its decline over the next two years, falling to 4.2% in 2025 and 3.6% in 2026. This forecast is "virtually unchanged" from the April report. However, the report notes cross-country differences, with inflation projected to remain above target in the US while being more subdued in other big economies.

MARKETS THIS MORNING-

It’s another mixed morning for Asian markets, as investors await for updates on US-China trade talks. The Shanghai Composite is up 0.4%, while Hong Kong’s Hang Seng is down 0.5%, and Japan’s Nikkei is unchanged. US investors are also bracing for the Fed’s decision today, leaving Wall Street futures unchanged.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.6% yesterday on turnover of SAR 4.4 bn. The index is down 10.1% YTD.

In the green: Baan (+8.7%), Amlak (+6.1%) and Maadaniyah (+2.3%).

In the red: Teco (-10.0%), Arabian Drilling (-10.0%) and UCIC (-7.5%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.2% yesterday on turnover of SAR 17.0 mn. The index is down 15.1% YTD.

In the green: Taqat (+9.1%), Aljouf Water (+5.6%) and Almuneef (+5.6%).

In the red: Anmat (-8.4%), Apico (-7.0%) and WSM (-6.5%).

CORPORATE ACTIONS-

Electrical Industries’ board recommended a SAR 140.6 mn dividend payout for 1H 2025 at SAR 0.125 per share, it said in a disclosure to Tadawul. The distribution date is set for 24 August.

City Cement will distribute SAR 91 mn in interim dividends for 1H 2025 at SAR 0.65 per share, it said in a disclosure to Tadawul yesterday. The distribution starts on 25 August.

Saudi Ceramics will distribute over SAR 49.8 mn in interim dividends for 1H 2025 at SAR 0.50 apiece, starting 2 September, it said in a disclosure to Tadawul yesterday.