World Economic Outlook (WEO) has reported that the International Monetary Fund (IMF) is lowering its projections for global growth to 2.8 per cent this year due to trade and tariff uncertainty and risk to financial markets.
IMF Chief Economist Pierre-Olivier Gourinchas said the surge in policy uncertainty is a major driver of the economic outlook. If sustained, the increase in trade tensions and uncertainty will slow global growth significantly, reflecting this complexity.
The report presents a reference forecast that incorporates policy announcements up to April 4 by the U.S. and trading partners.
Under this reference forecast, global growth will reach 2.8 per cent this year and 3 per cent next year. A cumulative downgrade of about 0.8 percentage point relative to our January 2025.
But with geopolitical conflict, increasing trade tensions and elections looming and leadership changes in major economies around the world there is considerable uncertainty.
Gourinchas who is also head of the Fund’s Research Department added that the global economy needs a clear, stable and predictable trading environment, one that addresses some of the longstanding gaps in international trading rules.
Monetary policy will need to remain agile and respond by tightening where inflation pressures reemerge, while easing where weak demand dominates. Monetary policy credibility will be key, especially where inflation expectations meet the anchor and central bank independence remains a cornerstone.
With all the uncertainty, it’s important for policy makers to make structural reforms and pursue multilateral cooperation that will boost growth the report said. And part of that is tackling inflation, so central banks must be in a position to make data-dependent decisions and protect their independence.
Gourinchas suggested that inflation rate needed to be stable as everyone remains convinced that central banks will do what is necessary to bring inflation back to central bank targets in an orderly manner.
