IMF Cuts Global Growth Forecast for 2025 Amid Escalating Trade Tensions and Policy Uncertainty
The International Monetary Fund (IMF) has downgraded its global growth forecast for 2025, now predicting an expansion of just 2.8%, down from the earlier forecast of 3.3%. This sharp reduction, outlined in the April 2025 World Economic Outlook (WEO), highlights escalating trade tensions, particularly the imposition of new tariffs by the United States and retaliatory measures from other nations, which have disrupted global supply chains and investor sentiment.
The IMF attributes the downgrade to these trade tensions and growing policy uncertainty, which are negatively affecting global economic activity. The U.S. tariffs, implemented in early April, have brought effective tariff rates to levels not seen in over a century, exacerbating the situation. The IMF warns that this unpredictable trade environment makes it difficult to forecast economic outcomes, with the current reference forecast incorporating the latest tariff data and potential outcomes under varying trade policy scenarios.
Advanced economies are expected to experience slower growth, with the U.S. economy seeing a significant revision, now forecasted to grow by only 1.8% in 2025. In contrast, emerging markets and developing economies are anticipated to slow to 3.7% growth in 2025, with countries most affected by trade measures, like China, experiencing notable downgrades. Inflation is expected to decline at a slower pace, reaching 4.3% in 2025, slightly slower than previous forecasts, with different outcomes expected for advanced and emerging economies.
The IMF highlights increasing downside risks, including the potential for a deeper trade war, rising financial instability, and vulnerabilities in emerging markets. It stresses the need for coordinated global policy actions to reduce uncertainty, stabilize trade relations, and address long-term issues like demographic changes and high debt levels in developing nations. While a de-escalation of trade tensions could boost global growth, the IMF urges nations to act swiftly to avert further economic damage.
Source: Citi newsroom