Press Briefing Transcript: World Economic Outlook, Spring Meetings 2025
IMF News, April 22, 2025
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- Published: April 22, 2025
Overview
- The global economy had appeared stabilized with steady but underwhelming growth after a prolonged series of shocks; since January 2025 the landscape has changed as governments reorder policy priorities and uncertainties have climbed to new highs.
- Many tariff announcements were made since late January, culminating on April 2, with near universal levies from the United States and counterresponses from some trading partners.
- The U.S. effective tariff rate "has surged past levels reached more than 100 years ago."
- The surge in policy uncertainty is a major driver of the revised outlook; global headline inflation is expected to decline at a slightly slower pace than expected in January.
Growth forecasts, scenarios, and key figures
- Reference forecast (incorporates policy announcements up to April 4):
- Global growth: 2.8 percent this year and 3 percent next year.
- Cumulative downgrade: about 0.8 percentage points relative to the January 2025 WEO update.
- Alternative path (excludes April tariff announcements):
- Global growth: 3.2 percent this year.
- Model‑based forecast incorporating the April 9 pause and prohibitive bilateral U.S.–China tariffs:
- Global growth: 2.8 percent (similar to reference forecast).
- Trade and inflation:
- Global trade growth: from 3.8 percent last year to 1.7 percent this year.
- Global inflation revisions: inflation revised up by 0.1 percentage point in both years (relative to January).
- United States:
- Growth revised down by 0.9 percentage points to 1.8 percent for 2025.
- Tariffs-only contribution to the U.S. downgrade: 0.4 percentage point.
- Projected U.S. headline inflation: 3 percent this year (same as last year).
- China:
- Growth forecast lowered to 4 percent for 2025.
- Tariff impact decomposition: tariffs imply a −1.3 percentage point revision on growth, partly offset by fiscal support.
- Fiscal support contribution since the beginning of the year: 0.5 percentage points.
- Headline inflation projection for 2025: 0 (revised down from 0.8 percent to 0).
- Risk assessments:
- Aggregate risk of a global downturn: increased from 17 percent (projected in October) to 30 percent now.
- U.S. recession probability (risk assessment): increased from about 25 percent in October to around 40 percent now.
Regional and country impacts (selected)
- United States:
- Tariffs act as a supply shock: reduce productivity and output permanently and increase price pressures temporarily.
- Weakening momentum pre‑tariffs also contributed to the downward revision.
- Trading partners generally:
- Tariffs act mostly as a negative external demand shock; some countries may benefit from trade diversion.
- China:
- Strong tariff exposure and elevated tariffs contribute to downgraded growth and increased deflationary pressures.
- United Kingdom:
- Growth revision: a 0.5 percentage point downward revision was noted; domestic factors are the largest contributors to the revision.
- Inflation revision: some U.K.‑specific factors, notably changes in regulated energy prices, account for inflation being higher (participants referenced a 0.7 percent higher inflation figure).
- Monetary assumption: four cuts assumed this year (one cut has already happened; three more expected).
- Russia:
- GDP growth projected to slow from 4.1 in 2024 to 1.5 in 2025.
- Medium‑term growth penciled in at about 1.2 (down from 1.7 pre‑war).
- Drivers: natural slowing after robust growth, fiscal and monetary tightening, lower oil prices and weaker global demand.
- Latin America:
- Activity largely consumption‑driven with resilient labor markets; investment sluggish.
- Slowdown reflects the impact of tariffs, global growth slowdown, policy uncertainty, withdrawal of fiscal stimulus, and some monetary tightening.
- Sub‑Saharan Africa:
- Regional growth improved to 4 percent in the prior year and will ease in 2025.
- Downward revision magnitude: about 0.4 percentage point.
- Low‑income countries (group):
- Downgrade: 0.4 percentage points.
- Expected growth: 4.2 percent in 2025.
- Heterogeneity: some vulnerable low‑income countries (including commodity exporters) face significant risks from reduced official aid, funding squeezes, and commodity price changes.
- Spain:
- Upgrade for 2025 driven by strong momentum in 2024, robust services exports and labor accumulation (including immigration).
- Projected 2026 growth: about 1.8.
- Argentina:
- 2025 growth projection maintained at 5.5 (report notes an upgrade of .5 related to positive surprises and recovery in confidence).
Trade, supply chains, and currency effects
- Tariffs and uncertainty:
- The surge in tariffs and policy uncertainty will cut global trade substantially and slow global growth across regions.
- Tariffs create complex sectoral disruptions across supply chains similar to pandemic‑era effects.
- Trade flow patterns:
- Bilateral trade flows depend on the final configuration of tariffs; large reductions expected particularly between the U.S. and China under multiple scenarios.
- Exchange rates:
- Tariffs could appreciate the U.S. dollar as in previous episodes, but greater policy uncertainty, lower U.S. growth prospects, and an adjustment in global demand for dollar assets are putting downward pressure on the dollar.
- A weakening dollar can ease pressures on dollar‑denominated liabilities for some emerging markets but may reduce competitiveness via currency appreciation in those markets.
Risks and financial conditions
- Downside risks have risen materially:
- Further escalation of trade tensions would depress growth and could tighten financial conditions.
- Markets are reassessing valuations and the new economic structure, creating volatility; however, observed market moves have not produced systemic market dislocations to date.
- Inflation and central banks:
- Monetary policy needs agility: tighten where inflation pressures re‑emerge; ease where weak demand dominates.
- Credibility and central bank independence are emphasized as critical amid elevated uncertainty.
- Tariffs have asymmetric inflation effects across countries (inflationary in the U.S., disinflationary for many trading partners).
Policy recommendations
- Restore trade policy stability:
- Priority is to restore a clear, stable, and predictable trading environment and address longstanding gaps in international trading rules.
- Monetary policy:
- Maintain agility: tighten where inflation pressures re‑emerge; ease where weak demand dominates.
- Preserve monetary policy credibility and central bank independence.
- Fiscal policy and debt:
- Many fiscal authorities will face new spending needs (defense, offsetting trade dislocations); support should be narrowly targeted and temporary where possible.
- Where new spending is permanent, plan for offsetting cuts or new revenues.
- Most countries need to rebuild fiscal space and implement structural reforms.
- International cooperation:
- Work toward fixing the trading system to deliver broader opportunities and reduce uncertainty.
Press Briefing Transcript: World Economic Outlook, Spring Meetings 2025 — April 22, 2025