The world economy will likely sidestep a recession despite mounting concerns over U.S. tariffs and global market instability, International Monetary Fund Managing Director Kristalina Georgieva said Thursday.
Speaking ahead of the upcoming IMF and World Bank Spring Meetings, Georgieva acknowledged that trade disruptions have created uncertainty and stoked market volatility. But she insisted that while growth forecasts may take a hit, a full recession seems unlikely.
“Trade disruptions incur costs,” Georgieva said during a press briefing. “We now expect notable markdowns to growth but no recession.”
Three Major Risks for the Global Economy
Georgieva identified three primary consequences of ongoing tariff tensions. Smaller advanced economies and emerging markets will likely feel the greatest strain due to their reliance on global trade.
“First, uncertainty is costly,” she said. Companies cannot plan investments or manage production if they don’t know how much future inputs will cost.
“Second, rising trade barriers hit growth upfront,” she continued. “Tariffs, like all taxes, raise revenue at the expense of reducing and shifting activity.”
Finally, she warned that “protectionism erodes productivity over the long run, especially in smaller economies.”
IMF Prepares to Lower Growth Forecast
The IMF had previously forecast global growth to reach 3.3% in 2025 and 2026. However, Georgieva suggested that next week’s updated World Economic Outlook will likely revise those numbers downward due to recent trade tensions and economic uncertainty.
“This is a reminder that we live in a world of sudden and sweeping shifts,” she said. “And it is a call to respond wisely.”
Fiscal and Monetary Policies Under Scrutiny
Georgieva urged governments to “put their own houses in order” by responsibly adjusting their fiscal and monetary policies. Countries should reduce debt where needed and maintain flexible but credible monetary policies.
She stressed the importance of central bank independence and emphasized that economic adjustments must be steady and well-communicated.
Tailored Advice for Major Economies
Georgieva offered specific guidance to some of the world’s largest economies. For China, she said the IMF recommends policies aimed at boosting domestic consumption and shifting away from the current export-heavy growth model.
“China needs to boost chronically low private consumption,” she said.
In the United States, she called on leaders to take action to slow the pace of rising government debt. “The United States must work to put rapidly rising government debt on a declining path.”
For the European Union, she suggested continued efforts to “improve competitiveness by deepening the single market.”
Calls for Global Cooperation on Trade
While the IMF remains a strong supporter of free trade and open markets, Georgieva acknowledged that current tensions have disrupted the global economic landscape. She urged the world’s largest economies to negotiate solutions to preserve openness and fairness.
“In trade policy, the goal must be to secure a settlement among the largest players that preserves openness and delivers a more level playing field,” she said.
She also advocated for a return to reducing both tariff and non-tariff barriers and for policies that give markets time to adjust.
“We need a more resilient world economy, not a drift to division,” she concluded. “And, to facilitate the transition, policies must allow private agents time to adjust and deliver.”
