In its latest World Economic Outlook update released Tuesday, the IMF raised the collective GDP growth forecast for emerging market and developing economies to 4.2% in 2025, up from the previous estimate of 4.1%. The revision comes amid signs of economic stabilization and policy support in China, the world’s second-largest economy, which plays an outsized role in shaping broader emerging market performance.
The Fund upgraded China’s 2025 GDP growth forecast to 4.6%, citing better-than-expected resilience in consumption, infrastructure spending, and a modest rebound in manufacturing. The new projection marks an improvement from the earlier 4.1% forecast in April, easing investor concerns over China’s post-pandemic slowdown.
“China’s targeted fiscal and monetary support measures appear to be gaining traction, especially in sectors like green technology and construction,” said IMF Chief Economist Pierre-Olivier Gourinchas. “This momentum, though still uneven, is helping lift sentiment across key emerging markets, particularly those closely linked to China through trade and investment.”
Several economies in Asia, Latin America, and Sub-Saharan Africa are poised to benefit from the spillover effects of China’s renewed demand. Countries such as Vietnam, Indonesia, and Brazil are expected to see stronger exports and investment inflows, while commodity exporters may gain from improved pricing trends.
Despite the upward revision, the IMF cautioned that risks remain. Persistent geopolitical tensions, debt vulnerabilities, and high interest rates in advanced economies could still pose challenges for developing markets. The report also warned of the long-term structural issues China faces, including its aging population, property market fragility, and productivity headwinds.
In contrast, growth projections for advanced economies in 2025 remain unchanged at 1.9%, reflecting tight monetary conditions and the lingering effects of inflation.
Financial markets reacted positively to the IMF update, with emerging market currencies and equities gaining modestly following the release. Analysts say the revised forecast offers a glimmer of hope for developing nations struggling to regain pre-pandemic growth momentum.
“The IMF’s revision is a vote of confidence in the resilience of emerging markets,” said Maya Narayanan, senior global economist at Capital Sphere Advisors. “But countries must use this window of opportunity to strengthen domestic fundamentals and accelerate structural reforms.”
As the global economy navigates a complex web of transitions from interest rate cycles to technological shifts the IMF’s latest outlook underscores the pivotal role China and its partners in the developing world will play in shaping global growth trajectories through 2025 and beyond.