IMF Cuts 2025-2026 Growth Forecasts Amid Trade Tensions

The International Monetary Fund (IMF) is poised to significantly lower its global growth projections for 2025 and 2026. The IMF's Managing Director, Kristalina Georgieva, has indicated that the organization's upcoming World Economic Outlook, scheduled for release on Tuesday, will reflect a more pessimistic outlook due to escalating trade tensions and significant shifts in the global trade system. Despite the anticipated downward revision, Georgieva has assured that the report will not predict a global economic recession.

Georgieva highlighted that the global economy is currently facing unprecedented uncertainty, largely driven by the U.S. administration's imposition of tariffs on various goods. This has led to extreme volatility in financial markets and has raised concerns about the potential for a global economic slowdown. The IMF's new growth projections are expected to account for these factors, as well as higher inflation expectations in some countries.

The IMF's Managing Director also warned that the heightened uncertainty could increase the risk of financial market pressures. She cited recent changes in the U.S. Treasury yield curve as a warning sign, emphasizing that a deterioration in financial conditions could have adverse effects on all economies. Georgieva urged countries to respond wisely to the sudden and comprehensive changes in tariff policies, which have led to actual tariff rates in the U.S. reaching levels not seen in decades. These changes have also triggered retaliatory measures from other countries, including China and the European Union.

Georgieva emphasized that the trade tensions have been brewing for some time and have now reached a critical point. She cautioned that when major economies engage in trade disputes, smaller economies often get caught in the crossfire. Given that China, the European Union, and the U.S. are the world's largest importers, the spillover effects on smaller, more vulnerable economies could be substantial. She urged countries to continue with economic and financial reforms, maintain flexible and credible monetary policies, and ensure robust financial market regulation and supervision.

In addition, Georgieva called for cooperation in a increasingly multipolar world and urged the largest economies to reach a trade resolution to maintain open trade and reverse the trend of rising tariffs and non-tariff barriers. She stressed the need for a more resilient global economy, where all countries, regardless of size, can play a role in strengthening global economic resilience in the face of more frequent and severe shocks.