IFM cuts global growth forecast for 2025 to 2.8% from 3.3%

The International Monetary Fund (IMF) announced in its updated World Economic Outlook report on Tuesday that it cut the global growth projections to 2.8% in 2025 and to 3% in 2026 from 3.3% for both years in the previous forecast, citing century-high US tariffs.

Key takeaways

"Swift escalation of trade tensions and high uncertainty expected to have significant impact on growth in all regions."

"Risks to global economy have increased and worsening trade tensions could further depress growth."

"Financial conditions could tighten as markets react to lower growth prospects, markets may face more severe tests."

"Global inflation expected to reach 4.3% in 2025 and 3.6% in 2026, with notable upward revisions for advanced economies."

"Intensifying downside risks dominate global outlook, escalating trade war could reduce near- and long-term growth."

"Policy shifts and deteriorating sentiment could trigger further repricing of assets, sharp adjustments in forex rates."

"Broader financial instability could occur, including damage to international monetary system."

"US growth projected to slow to 1.8% in 2025, down 0.9 percentage point from January forecast, due to policy uncertainty, trade tensions."

"IMF sees Mexico's economy among the hardest hit and forecasts it contracting by 0.3% in 2025, down from 1.4% growth forecast in January."

"US faces significant uptick of one percentage point in headline inflation, not all due to tariffs."

"Federal Reserve will have to be very vigilant on de-anchored inflation expectations, impact on wages."

"Independence is key component of central banks' credibility on fighting inflation."

"Not forecasting recession for US but risk of recession has increased to nearly 40%."

"Depreciation of US Dollar has been orderly, not seeing dislocation in currency markets."

"Restoring predictability to global trading system is absolutely critical to bolstering growth."

Market reaction

The US Dollar Index showed no immediate reaction to the IMF's report and was last seen gaining 0.3% on the day at 98.60.