IMF sees no recession on the "horizon" - But uncertainty caused by tariffs could hurt global growth
US President Donald Trump's push for sweeping tariffs is creating great uncertainty and damaging confidence, but is unlikely to trigger a near-term recession, International Monetary Fund Managing Director Kristalina Georgieva said.
In her first interview since Trump took office, Georgieva highlighted the challenges facing a global economy that is still seeing tremendous growth after the wounds of the COVID pandemic, but said there is no need to be alarmed.
The IMF is likely to slightly lower the economic outlook in its next update in about three weeks, but "we do not see a recession on the horizon," Georgieva stressed.
"What we see in the high-frequency indicators is that consumer confidence, investor confidence are weakening somewhat and we know that that translates into an impact on growth prospects. However, the IMF is not yet seeing a dramatic impact from the tariffs implemented and threatened so far by Trump since his return to the White House," she added.
In January, the IMF raised its global economic growth estimate for 2025 to 3.3%, from 3.2% in its previous estimate in October, a half-percentage point improvement over the US outlook of 2.7%.
While the current impact was moderate, Georgieva warned that many countries had used up their fiscal and monetary space during COVID and now had high debt levels, limiting their ability to respond to future shocks.
Any slowdown or reversal in the disinflation process could slow the decline in interest rates and make it harder for countries to refinance their debt. Trade developments could dampen U.S. growth "somewhat," but its overall outlook remained "okay," Georgieva said.
The planned increase in defense spending in Europe and Germany's decision to repeal its debt curb, which it called a "self-inflicted injury," mean greater economic expansion in the region. Meanwhile, China should use its policy space and focus on boosting domestic consumption.
Trade changes
Since returning to the White House in January, Trump has imposed 20% tariffs on all goods from China. He has since imposed steep tariffs on steel and aluminum imports, and announced a 25% tariff on imported cars. The US president has declared April 2 as "Liberation Day," when he plans to unveil the global reciprocal tariffs.
The unpredictable pace of tax announcements and implementation has soured investor sentiment, with major U.S. stock indexes down nearly 10% since mid-February on concerns that the tariffs will slow growth or even trigger a recession.
The longer uncertainty about Trump's approach to tariff policy persists, the greater the risk to the outlook, Georgieva said.
Georgieva said global trade continued to expand, despite a surge in protectionist measures around the globe, which has changed trade patterns and is challenging globalization. Trade in services is also outpacing growth in trade in goods.
Small and medium-sized countries were increasing cooperation among themselves and focusing on structural reforms, while working to increase their resilience, the IMF chief added.
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