IMF Cuts Growth Outlook for Emerging Economies

By Karin Strohecker and Rodrigo Campos

WASHINGTON (Reuters) – The International Monetary Fund (IMF) on Tuesday reduced its 2025 growth forecast for emerging economies, including Mexico and China. It warned that tighter funding and a lack of development cash could hurt these nations.

The U.S. tariffs under President Donald Trump and ongoing policy uncertainty are predicted to hinder global growth. This comes as the world economy is recovering from shocks such as the COVID-19 pandemic and Russia’s invasion of Ukraine.

In its World Economic Outlook, the IMF revised down its growth expectations for emerging markets and developing countries to 3.7% for this year and 3.9% for 2026, about half a percentage point lower than previous estimates from January. This represents a notable slowdown from the anticipated 4.3% growth in 2024.

The IMF stated, “At this juncture, while the situation remains fluid, risks remain firmly tilted to the downside.”

• Country-Specific Forecasts: Mexico’s growth forecast was cut by 1.7 percentage points, predicting a contraction of 0.3% this year. China’s forecast dropped by 0.6 percentage points for this year and the next, affected by trade tensions with the U.S.
• Surprisingly, Russia’s 2025 growth prediction improved by 0.1 percentage points, now at 1.5%, though this signifies a slowdown from last year’s 4.1% growth.

The IMF noted that fiscal space in many emerging economies has tightened compared to a decade ago, while the cost of debt servicing is increasing.

The report warned, “The resilience shown by many large emerging market economies may be tested as servicing high debt levels becomes more challenging in unfavorable global financial conditions.”

Despite lower servicing costs compared to pandemic levels, rolling over debts in the current climate could lead to higher effective rates, especially for low-income countries. Additionally, many face challenges due to reduced concessional and development financing.

The report concluded, “More limited international development assistance may increase the pressure on low-income countries, pushing them deeper into debt or necessitating significant fiscal adjustments, ultimately affecting growth and living standards.”

The Trump administration is advocating for a significant shift in development finance, including the dismantling of the U.S. Agency for International Development, while financial support from countries like France and Britain is also declining.