In its latest World Economic Outlook (WEO) released on Tuesday, the IMF projects global growth will slow to 2.8 percent in 2025, a significant 0.5 percentage-point drop from its earlier forecast in January. Growth is expected to rebound slightly to 3.0 percent in 2026, still 0.3 percentage points below previous expectations.
“We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” IMF Chief Economist Pierre-Olivier Gourinchas said during a press briefing in Washington, as the IMF and World Bank Spring Meetings commenced.
According to the report, increasing uncertainty and trade disputes—particularly driven by recent tariff hikes on Chinese goods—are disrupting global supply chains and stalling investment flows. Notably, the report was based on data up to April 4, meaning it did not fully reflect the most recent tariff increases that have pushed new levies on Chinese imports to 145 percent.
If those additional tariffs are sustained, the IMF warns the global economy could face further deterioration in growth prospects.
United States Slows, Inflation Rises
The US economy is expected to grow by only 1.8 percent this year, nearly a full percentage point lower than January’s forecast. Growth is anticipated to slow further to 1.7 percent in 2026, as the IMF cites “greater policy uncertainty, trade tensions, and softer demand momentum.”
Inflation forecasts were also revised upward, with the Fund now predicting 3.0 percent inflation in the US for 2025, and 2.5 percent in 2026. The ripple effect of tariffs is expected to raise global consumer prices, with the IMF now forecasting 4.3 percent inflation worldwide in 2025, and 3.6 percent in 2026.
Major Trading Partners Feel the Strain
Key US trading partners have not been spared. The IMF now sees China’s economy—the world’s second largest—slowing sharply to 4.0 percent in 2025, down from 5.0 percent last year. Even increased government spending in Beijing has not been enough to cushion the blow from US tariffs.
In Mexico, the economy is forecast to contract by 0.3 percent, slashed by 1.7 points from earlier projections. Canada’s outlook has also been scaled back significantly.
Elsewhere in Asia, Japan is expected to see tepid growth of 0.6 percent in both 2025 and 2026, marking a considerable downward revision from previous forecasts.
International Monetary Fund Chief Economist Pierre, Olivier Gourinchas (C) and IMF Research Department Deputy Director Petya Koeva Brooks (R) take questions as they speak on the "World Economic Outlook" during the IMF/World Bank Group Spring Meetings in Washington, DC, on April 22, 2025. | Credit: AFP
European Outlook Weakens, Except Spain
The economic drag from tariffs is also reverberating through Europe, with the eurozone’s growth forecast cut to 0.8 percent for 2025, and a modest 1.2 percent in 2026. Germany is now projected to register zero growth this year, while France, the UK, and Italy have all had their growth forecasts trimmed.
One bright spot on the continent is Spain, whose economic outlook was revised upward to 2.5 percent growth for 2025. The Fund attributes this to strong economic momentum carried over from 2024.
Other Regional Impacts
The IMF also issued a bleak outlook for the Middle East, citing ongoing conflicts and disruptions to oil and shipping. However, the Fund remains cautiously optimistic about a rebound starting in late 2025 as stability returns.
In sub-Saharan Africa, growth is projected to dip slightly to 3.8 percent, before recovering in 2026. The region remains vulnerable to global shocks, particularly in commodity markets and foreign investment flows.
While the IMF emphasizes the importance of policy coordination and de-escalation of trade disputes, the report paints a cautious picture of the near-term global outlook. As Gourinchas noted, “The risks remain tilted to the downside. Prolonged trade tensions, rising inflation, and fragile consumer confidence could all undermine the recovery.”
The message to global leaders as they gather in Washington is clear: cooperation and stability are more critical than ever to prevent a deeper global slowdown.