Opinion
IMF outlook: The good, the bad and the unsaid
Summary
The International Monetary Fund’s April 2025 ‘World Economic Outlook’ is both reassuring and disturbing. It reflects the uncertain times through which the world is passing—and calls for reflection.Two takeaways stand out from the latest iteration of the International Monetary Fund’s (IMF) World Economic Outlook (WEO), issued for April 2025. One is reassuring and the other, disturbing. The biggest consolation is that, contrary to widespread fears, the global economy is nowhere near a recession.
According to the Fund, “Despite the slowdown, global growth remains well above recession levels." World output is projected to grow by 2.8% in 2025. Sure, this is half a percentage point less than its January 2025 rate projection and it expects this weakness to persist into 2026, when growth is expected to be 3%, three-tenths of a percentage point less than its January forecast. However, we’re not headed for recession territory, defined as two consecutive quarters of a drop in output.
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Global trade has also been quite resilient so far, thanks partly to the ingenuity of businesses that were able to re-route trade flows. But, as the IMF warns, this may become increasingly difficult from here on. As a result, global trade growth is expected to dip more than output, to 1.7% in 2025—a “significant downward revision" since the January WEO.
Not surprisingly, the slowdown, while generalized, is not projected to affect every country equally.
Thus, India is expected to grow at 6.2% in the current fiscal year. This is 0.3 percentage points lower than the January WEO forecast, given today’s global uncertainty and trade tensions, but not much lower than the Reserve Bank of India’s estimate of 6.5%.
Deservedly, the sharpest downgrade is for the US, where, according to the IMF, demand was “already softening" before the White House’s recent tariff announcements. The cut reflects greater policy uncertainty. With 2 April taken as the reference point for its forecast, the day President Donald Trump unveiled his policy of steep import-barrier hikes, the IMF lowered its US growth estimate for 2025 to 1.8%, almost a whole point less than its January estimate. Tariffs alone account for a 0.4-point reduction.
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Now for the disturbing part. Slower growth this year and the next will not be the result of a force majeure like covid, but the outcome of needless trade turmoil. The effective tariff rate in the US, which once prided itself on being one of the world’s most open economies, is now higher than the level reached during the Great Depression (when levies were less broad), even as the counter-tariffs of major trade partners push up the global average significantly.
Inevitably, steeper barriers and policy uncertainty (read flip-flops) have driven the Fund’s growth projections down. In the words of IMF Chief Economist Pierre-Olivier Gourinchas, “We are entering a new era as the global economic system that has operated for the last 80 years is being reset." What does it imply? As the WEO puts it, “Amid trade tensions and high policy uncertainty, the path forward will be determined by how challenges are confronted and opportunities embraced."
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What the WEO leaves unsaid, perhaps understandably, is that today’s troubles are one man’s creation. In which case, the solution may not prove as elusive as many assume. Trump may soon confront starker signs of how his bid to rejig the world economic order, one that has led to a rapid rise in prosperity, could harm his own cause. And how the entire world, the US especially, will have to pay the price.
“If it ain’t broke, don’t fix it" is an old American quip that’s attributed to Bert Lance, an advisor to Jimmy Carter. That says it all.
