The International Monetary Fund (IMF) has cut its growth projections across the board, in response to the higher tariffs and policy uncertainty that are the outcome of U.S. President Donald Trump’s April 2 near-universal import tariff policy.
World output in 2025 is projected to grow at 2.8%, half a percentage point less than the January projection. It is expected to be 3.0% in 2026, 0.1 percentage points less than the January forecast. The numbers were released in the April 2025 World Economic Outlook: A Critical Juncture amid Policy Shifts, to mark the launch of the World Bank IMF Spring Meetings in Washington DC on Tuesday (April 22, 2025).
India’s growth outlook trimmed to 6.2% for FY26
For India, growth is forecast to be 6.2% in the current fiscal year (i.e., year ending March 31, 2026), supported by private consumption especially in rural areas, but it is at 0.3 percentage points lower than in the January 2025 forecast due to global uncertainty and trade tensions, the IMF said. India’s economic growth for the next fiscal year is projected to be 6.3%. Consumer price changes for India are projected to be 4.2% and 4.1% in the current and next fiscal years respectively.
“We are entering a new era as the global economic system that has operated for the last eighty years is being reset,” IMF Chief Economist Pierre-Olivier Gourinchas said at a briefing on Tuesday, as he pointed to U.S. effective tariff rates being at their highest levels in more than 100 years as well as the higher tariff rates on the U.S.
“Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook,” Mr. Gourinchas said.
Also read | IMF says slashes China growth forecast for this year to 4%
Risks to global downturn substantially higher
The IMF released a range of growth forecasts given the unusual levels of policy uncertainty, with the reference forecasts above based on the tariff and counter-tariff measures announced as of April 4.
While the IMF was not predicting a global downturn, the risks it may happen this year have increased “substantially” from 17% to 30%, Mr. Gourinchas said.
While global growth remained well above recession levels, all regions would be negatively impacted this year and next, Mr. Gourinchas said, adding that the disinflation process had been impeded , with inflation being revised up by 0.1 percentage points.
Also read | China retaliates with 125% tariffs against U.S. imports
U.S. growth has also been downgraded since the January forecasts, down by 0.9 percentage points this (calendar) year to 1.8%. The Euro area is expected to grow at 0.8% this year. China is projected to grow at 4% this year, a loss of 0.6 percentage points compared to its January forecasts. Beijing has retaliated against Mr. Trump’s tariffs charging 125% tariffs on U.S. goods entering China as it faces a 145% tariff rate (245% for some goods) on exports to the U.S.
Downside risks dominate the growth outlook, the IMF said, citing, for instance, divergent and rapidly shifting policy stances that could trigger further repricing of assets, beyond what has already occurred since April 2, as well as causing sharp changes in exchange rates and capital flows. The IMF has also warned that low growth and lingering cost of living issues could foment social unrest. The resilience of emerging economies could be tested as servicing of high levels of debt becomes more difficult in challenging global financial situations. As advanced economies cut back on development assistance, this could increase pressure on low income countries.
A de-escalation from the current tariff levels and new agreements that bring stability and clarity could boost global growth, the IMF said.
“Even if some of the grievances against our trading system have merit, we should all work towards fixing the system so that it can deliver better opportunities to all,” Mr. Gourinchas said.
Published – April 22, 2025 07:12 pm IST
