International Monetary Fund issues caution about diminishing worldwide economic expansion due to escalating geopolitical conflicts and uncertainties.
The International Monetary Fund (IMF) has published a report titled "Weak Resilience Amid Persistent Uncertainty," highlighting several key risk factors and downside risks for a potential global economic slowdown in 2025. Despite a modest upward revision in growth forecasts, the IMF identifies elevated geopolitical tensions, persistent uncertainty, trade risks, rising fiscal deficits, economic fragmentation, and potential tighter monetary policies as the main threats to global growth.
One of the key factors driving the IMF's revised projections is the lower-than-expected average effective tariff rates in the United States. Eased financial conditions linked to a weakening US dollar and expansionary fiscal policies in major economies are also contributing to the IMF's revised projections.
The IMF projects global economic growth at about 3.0% in 2025 and 3.1% in 2026, a slight upward revision from prior forecasts. However, despite these positive revisions, the IMF warns that downside risks remain significant.
The main downside risks for global growth in 2025 center on escalating trade barriers, geopolitical conflicts, policy uncertainty, and tighter financial and monetary conditions, all of which could disrupt supply chains, elevate prices, and hamper investment.
The report identifies ongoing global tensions and policy uncertainty, as well as rising commodity prices, as factors that could force central banks to adopt tighter monetary policies, potentially leading to higher long-term interest rates. De-escalation of geopolitical conflicts is crucial for fostering long-term resilience in the global economy.
In addition, the IMF recommends credible policy frameworks promoting economic predictability, fiscal discipline, and long-term sustainability. Implementation of structural reforms is necessary to unlock stronger global growth and long-term resilience.
Progress on permanent trade agreements is essential for stronger global growth, as escalating trade barriers could disrupt supply chains. The global average inflation is predicted to be 4.2% in 2025 and 3.6% in 2026, with regional variations.
In the United States, inflation is projected to remain above the Federal Reserve's 2% target. Despite the revised projections, the IMF warns that downside risks remain significant, and growth could be hampered by various factors, including escalating trade barriers, geopolitical conflicts, and tighter financial and monetary conditions.
In conclusion, while the IMF has revised its projections for global economic growth slightly upward, it cautions that several downside risks persist. The IMF urges governments and central banks to implement policies that foster economic predictability, promote fiscal discipline, and ensure long-term sustainability to mitigate these risks and support global economic growth.
Business sectors should implement structural reforms to foster stronger global growth and long-term resilience, says the IMF. To combat downside risks and support global economic growth, governments and central banks are urged to adopt credible policy frameworks promoting economic predictability, fiscal discipline, and long-term sustainability.
