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Economic conditions

Global Trade Disruption: IMF Warns of Economic Slowdown

Strategic Insights

— 1 min read

The International Monetary Fund (IMF) has significantly downgraded its global growth forecast, citing the impact of US tariffs on global trade, which has led to unprecedented uncertainty and a sharp increase in tariff rates. The IMF's report warns that global growth will slow down from 3.3% in 2024 to 2.8% in 2025, before edging up to 3% in 2026. This downgrade reflects the direct effect of new trade measures and the knock-on impact on uncertainty, which has surged to "unprecedented" levels, and deteriorating sentiment among consumers and businesses.

Key Takeaways:

  • The IMF has slashed its global growth forecast by 0.5 percentage points this year, with nearly all countries seeing a downgrade.
  • The latest World Economic Outlook report was produced under "exceptional circumstances" due to the US President's unveiling of new and higher tariffs.
  • Global growth is projected to fall from 3.3% in 2024 to 2.8% in 2025, before edging up to 3% in 2026, lower than the IMF's previous forecasts by 0.5 percentage points for 2025 and 0.3 percentage points for 2026.
  • The outlook for nearly all countries has been downgraded, reflecting the direct effect of new trade measures and the knock-on impact on uncertainty, which has surged to "unprecedented" levels.
  • The UK economy is predicted to grow by 1.1% this year, 0.5 percentage points less than January's forecast, partly reflecting tariffs, as well as weaker consumption amid higher inflation driven by bills and energy price hikes.
  • Growth will nonetheless be stronger in the UK than Germany, which is predicted to flatline this year, France, and Italy.
  • Inflation forecasts have been revised upwards for advanced economies since January, with the UK and the US being hit hardest, with UK inflation set to be 3.1% this year.

Statistics:

  • Global growth forecast: 3.3% in 2024, 2.8% in 2025, and 3% in 2026.
  • Downgrade in global growth forecast: 0.5 percentage points for 2025 and 0.3 percentage points for 2026.
  • UK economy growth forecast: 1.1% this year.
  • Inflation forecast for the UK: 3.1% this year, 0.7 percentage points higher than previous forecast.

Sources:

  • International Monetary Fund (IMF) - World Economic Outlook report
  • Pierre-Olivier Gourinchas, IMF's top economist
  • Chancellor Rachel Reeves
  • The report also quotes other unnamed sources, but they are not explicitly attributed in the original text.

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