April, 23, 2025
The International Monetary Fund (IMF) released its latest World Economic Outlook (WEO) on April 22, 2025, titled "A Critical Juncture Amid Policy Shifts." Presented by IMF Economic Counsellor Pierre-Olivier Gourinchas, Deputy Director Petya Koeva Brooks, and Division Chief Deniz Igan, the report highlights a significant downgrade in global growth forecasts, driven by escalating trade tensions and policy uncertainty. Below is a detailed summary of the key findings and projections.
The IMF projects global growth to reach 2.8% in 2025 and 3.0% in 2026, a cumulative downgrade of 0.8 percentage points from the January 2025 WEO update. This revision stems primarily from a surge in trade barriers, notably U.S. tariff announcements since late January, culminating in near-universal levies on April 2, 2025. The U.S. effective tariff rate has surpassed levels not seen in over a century, prompting counterresponses from trading partners.
Alternative Scenarios: Without the April tariff hikes, global growth would have been 3.2% in 2025. A model-based forecast incorporating a temporary tariff suspension (announced April 9) and heightened U.S.-China bilateral tariffs yields a similar 2.8% growth outlook.
Regional Impact: All regions face negative impacts. The U.S. growth forecast is revised down by 0.9 percentage points to 1.8%, with 0.4 points directly attributable to tariffs. China's growth is cut to 4.0%, a 0.6-point downgrade, while the U.K. sees a 0.5-point reduction due to domestic factors and trade uncertainty.
The report underscores a sharp decline in global trade growth, projected to fall from 3.8% in 2024 to 1.7% in 2025, driven by trade tensions and uncertainty. Tariffs are expected to disrupt supply chains, reduce productivity, and alter trade flows.
U.S. Impact: Tariffs act as a supply shock, permanently reducing output and temporarily increasing inflation to 3.0% in 2025, unchanged from 2024.
China: Tariffs create a negative demand shock, lowering inflation to 0% in 2025, intensifying deflationary pressures.
Global Disinflation: The disinflation process continues but slows, with global inflation revised up by 0.1 percentage points for 2025 and 2026.
The U.S. economy, previously robust, faces a slowdown due to weakening momentum and tariff-induced supply shocks. Despite a 1.8% growth forecast, the risk of a recession has risen from 25% in October 2024 to 40% in April 2025. The U.S. dollar is under downward pressure due to lower growth prospects and uncertainty, though markets remain resilient.
China's 4.0% growth forecast reflects a 1.3-point hit from tariffs, partially offset by 0.5 points of fiscal support. The 0% inflation projection signals heightened deflationary risks, exacerbated by reduced external demand.
The U.K.'s growth is revised down by 0.5 points, driven by domestic factors like weaker 2024 growth carryover and tightened financial conditions. Inflation is revised upward due to regulated energy price changes, making the U.K. the highest in the G-7 for 2025, though tariffs are expected to lower price pressures.
Latin American growth slows due to tariffs, global demand weakness, and policy tightening. Argentina maintains a 5.5% growth forecast, supported by confidence recovery despite fiscal adjustments, but faces risks from tighter financial conditions.
Growth eases to 4.2% in 2025, down 0.4 points, reflecting global slowdown and trade disruptions. The region’s young population offers a demographic dividend, but leveraging it requires structural reforms in education, healthcare, and international cooperation.
Spain stands out with an upward revision, driven by strong 2024 momentum, robust services exports, and labor accumulation from immigration. However, growth is expected to slow to 1.8% in 2026 as tariff impacts materialize.
The IMF identifies heightened downside risks, with the probability of a global downturn rising from 17% in October 2024 to 30% in April 2025. Key risks include escalating trade tensions, tightening financial conditions, and market reactions to uncertainty. However, easing trade policies and fostering a stable trade environment could improve growth prospects.
Restore Trade Stability: A predictable trading system is essential to address gaps in international rules.
Agile Monetary Policy: Central banks must tighten where inflation persists and ease where demand weakens, maintaining credibility and independence.
Fiscal Prudence: Countries should rebuild fiscal space, target support narrowly, and plan for permanent spending needs (e.g., defense) with offsetting measures.
Structural Reforms: Europe should invest in infrastructure, China should boost domestic demand, and the U.S. should pursue fiscal consolidation.
The WEO’s analytical chapters highlight:
Demographic Dividends: Sub-Saharan Africa’s young population could drive growth with investments in human capital.
Trade Rules: Chapter 3 emphasizes the need for updated international trading rules to mitigate disruptions and ensure equitable opportunities.
The IMF’s April 2025 WEO paints a cautious picture of a global economy at a crossroads. Escalating trade tensions, led by U.S. tariff hikes, have significantly downgraded growth forecasts and disrupted trade flows. While the global economy remains above recession levels, increased uncertainty and downside risks call for prudent policies and international cooperation to restore stability and foster sustainable growth.
For the full report, data, and additional resources, visit IMF.org.
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