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THE International Monetary Fund (IMF) has revised Malaysia’s real gross domestic product (GDP) growth forecast upward to 4.5 per cent for 2025 and 4.0 per cent for 2026, citing improved prospects across developing and emerging economies.
In its July 2025 update of the World Economic Outlook (WEO), titled Global Economy: Tenuous Resilience amid Persistent Uncertainty, the IMF said the 2025 forecast marks a 0.4 percentage point increase from the April 2025 reference projection, while the 2026 forecast is 0.2 percentage points higher.
"For emerging market and developing economies, growth is projected at 4.1 per cent in 2025 and 4.0 per cent in 2026," the report noted.
The IMF also upgraded China’s 2025 forecast by 0.8 percentage points to 4.8 per cent, "reflecting stronger-than-expected activity in the first half of 2025 and substantial reductions in US-China tariffs."
The 2026 forecast for China was also revised upwards to 4.2 per cent, "again reflecting a lower effective tariff rate."
India’s growth projections were maintained at 6.4 per cent for both 2025 and 2026, with the IMF noting that the figures were revised upward "to reflect a more favourable external environment compared to the assumptions in the April reference projection."
Despite the improved outlook, the IMF cautioned that global uncertainty remains elevated, urging countries to reduce policy-related unpredictability by fostering "clear and transparent trade frameworks".
"Pragmatic cooperation is essential when certain rules within the current international trade system may not function as intended," the report stated, adding that multilateral initiatives and regional solutions should be pursued to modernise trade regulations.
Bilateral negotiations, it said, could help ease trade tensions and should aim to reduce barriers to trade and investment without creating additional obstacles for third parties.
"Such negotiations must focus on addressing the root causes of tension: namely, excessive external imbalances stemming from domestic policy choices," the IMF said.
The report also cautioned against overreliance on broad subsidies and industrial policies aimed at protecting exports, warning they could be costly and disruptive.
Amid prolonged trade tensions and shifting tariff landscapes, central banks were urged to carefully calibrate monetary policy to safeguard price and financial stability.
"In countries that impose tariffs—whether initiating or in retaliation—such actions represent supply shocks," the report said.
"Central banks in these countries face a dilemma between shielding the real economy and preventing one-off price increases from turning into sustained high inflation. This dilemma becomes more pronounced if inflation exceeds target."
Further monetary easing, it added, should be contingent upon clear evidence that inflation expectations and inflation itself are returning to target levels.
"Conversely, countries that do not impose tariffs may experience demand shocks. In such cases, central banks could gradually lower policy rates," the IMF stated. - July 30, 2025
