IMF Managing Director: No Risk of Recession

International Monetary Fund (IMF) Managing Director Kristalina Georgieva

No recession in sight

In an interview with Reuters NEXT Newsmaker, Ms. Georgieva emphasized the challenges facing the global economy, which is still recording unimpressive growth after being affected by the Covid pandemic, but she also said that there should be no need to worry too much.

The IMF is likely to downgrade its global economic outlook slightly in its next World Economic Outlook (WEO) update in about three weeks, but “we do not see a recession ahead,” she told Reuters NEXT Newsmaker.

“What we see in the indicators is that consumer confidence and investor confidence are weakening somewhat, and we know that that then impacts the growth outlook,” she said. But so far, the IMF has not seen a “significant impact” from the tariffs that Mr. Trump has imposed and threatened to impose.

In January, the IMF raised its 2025 global economic growth forecast to 3.3% from 3.2% in its previous forecast in October, with the US economic growth forecast rising to 2.7%. However, the updated WEO – due in April when the IMF holds its spring meetings in Washington – will reflect a “small downward revision” to those estimates, Georgieva said, adding that while trade developments could dampen growth in the US “a little”, the overall outlook remains “stable”.

While the current impact is moderate, she warned that many countries have exhausted their fiscal and monetary space during Covid and now have high debt levels, limiting their ability to respond to future shocks.

In addition, any slowdown or reversal in disinflation could slow the decline in interest rates and make it harder for countries to refinance their debt.

Global trade still growing

Since returning to the White House in January, Mr. Trump has imposed a 20% tariff on all goods from China; threatened and then delayed a 25% tariff on most goods from Canada and Mexico; imposed steep tariffs on imported steel and aluminum; announced a 25% tariff on imported cars; and declared April 2 to be “Liberation Day,” when he plans to announce reciprocal tariffs globally.

The unpredictable pace of announcements and implementation of tariffs has sapped investor confidence, with major US stock indexes down nearly 10% since mid-February on concerns the tariffs will slow growth or even trigger a recession.

The IMF chief also said that the longer uncertainty about Trump’s approach to tariffs persists, the greater the risks to the outlook. “The sooner we get clarity, the better, as our research shows that the longer the uncertainty persists, the more likely it is to have a negative impact on growth,” she said.

However, she said global trade continued to grow, despite the rise of protectionist measures around the world that were reshaping trade patterns and challenging globalization, with services trade outpacing growth in goods trade.

She also said small and medium-sized countries are increasing cooperation with each other and focusing on domestic structural reforms as they work to strengthen their resilience.

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