IMF Cuts Global Economic Growth Forecast to 2.8%
The International Monetary Fund (IMF) has slashed its global economic growth forecast for 2025 by 0.5% to 2.8% warning the outlook could deteriorate further as US President Donald Trump’s tariffs spark a global trade war.
The IMF released an update to its World Economic Outlook compiled in just 10 days after U.S. President Donald Trump announced universal tariffs on nearly all trading partners and higher rates – currently suspended – on many countries.
It cut its forecast for global growth by 0.5 percentage point to 2.8% for 2025, and by 0.3 percentage point to 3% from its January forecast that growth would reach 3.3% in both years.
It said inflation was expected to decline more slowly than expected in January, given the impact of tariffs, reaching 4.3% in 2025 and 3.6% in 2026, with “notable” upward revisions for the U.S. and other advanced economies.
The IMF called the report a “reference forecast” based on developments through April 4, citing the extreme complexity and fluidity of the current moment. “We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF chief economist Pierre-Olivier Gourinchas told reporters.
The IMF said the swift escalation of trade tensions and “extremely high levels” of uncertainty about future policies would have a significant impact on global economic activity.
Weaker growth prospects had already lowered demand for the dollar, but the adjustment in currency markets and portfolio rebalancing seen to date had been orderly, he said.
“We are not seeing a stampede or a run to the exits,” Gourinchas said. “We’re not concerned at this stage about the resilience of the international monetary system. It would take something much bigger than this.”
However, medium-term growth prospects remained mediocre, with the five-year forecast stuck at 3.2%, below the historical average of 3.7% from 2000-2019, with no relief in sight absent significant structural reforms.
The IMF slashed its forecast for growth in global trade by 1.5 percentage point to 1.7%, half the growth seen in 2024, reflecting the accelerating fragmentation of the global economy.
Trade would continue, but it would cost more and it would be less efficient, he said, citing confusion and uncertainty about where to invest, where to source products and where to buy components. “Restoring predictability and clarity to the trading system in whatever form is absolutely critical,” he said.
The IMF downgraded its forecast for U.S. growth by 0.9 percentage point to 1.8% in 2025 – a full percentage point down from 2.8% growth in 2024 – and by 0.4 percentage point to 1.7% in 2026, citing policy uncertainty and trade tensions.
Gourinchas told reporters the IMF was not forecasting a recession in the U.S., but the odds of a downturn had increased from about 25% to 37%. He said the IMF was now projecting U.S. headline inflation to reach 3% in 2025, one percentage point higher than it forecast in January, due to tariffs and underlying strength in services.
That meant the Federal Reserve will have to be very vigilant in keeping inflation expectations anchored, Gourinchas said, noting that many Americans were still scarred by a spike in inflation during the COVID pandemic.
Asked about the impact of any moves by the White House to remove Fed Chair Jerome Powell, Gourinchas said it was “absolutely critical” that central banks were able to remain independent to maintain their credibility in addressing inflation.
IMF slashed its forecasts for growth in the United States, China, and most countries, citing the impact of U.S. tariffs now at 100-year highs and warning that further trade tensions would slow growth further. #IMF Cuts Global Economic Growth Forecast to 2.8%
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