The International Monetary Fund (IMF) has significantly lowered its outlook for global economic expansion, forecasting a growth rate of just 2.8 percent in 2025, down from the 3.3 percent projection released in January.

The revised figures appear in the Fund’s April 2025 World Economic Outlook (WEO), which identifies escalating trade tensions and heightened policy uncertainty as primary drivers of the slowdown.

Speaking to the findings, the report points to recent U.S. tariff hikes and retaliatory measures by its trading partners as having “ended up in near-universal US tariffs on April 2 and bringing effective tariff rates to levels not seen in a century.” According to the WEO, “This on its own is a major negative shock to growth. The unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook and, at the same time, makes it more difficult than usual to make assumptions that would constitute a basis for an internally consistent and timely set of projections.”

Given the rapidly changing environment, the IMF has framed this edition of the WEO as a “reference forecast” based on data up to April 4, 2025, rather than its standard baseline. The Fund cautions that “the swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity,” with growth now seen at 2.8 percent in 2025 and edging up to 3.0 percent in 2026—collectively 0.8 percentage point below January’s forecasts and well below the 2000–2019 average of 3.7 percent.

Advanced economies are set to slow markedly, with overall growth of just 1.4 percent in 2025. The U.S. forecast has been pared back to 1.8 percent—almost a full point below earlier estimates. Emerging market and developing economies will also feel the pinch, with projected growth rates of 3.7 percent in 2025 and 3.9 percent in 2026, and particularly steep downgrades for nations most exposed to trade disruptions, such as China. Global headline inflation is now expected to ease more slowly than anticipated, at 4.3 percent in 2025 and 3.6 percent in 2026, reflecting upward revisions for advanced economies and slight downward tweaks for developing markets.

The IMF warns that a deepening trade war, financial market volatility, and stretched policy buffers could exacerbate these trends. “Intensifying downside risks dominate the outlook. Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks. Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets beyond what took place after the announcement of sweeping US tariffs on April 2 and sharp adjustments in foreign exchange rates and capital flows, especially for economies already facing debt distress,” the report cautions.

The Fund also highlights the potential human and financial costs of continued uncertainty: capital flight and currency pressures in vulnerable markets, increasing debt burdens, and the risk of social unrest if living‑cost pressures persist. “Broader financial instability may ensue, including damage to the international monetary system. Demographic shifts and a shrinking foreign labor force may curb potential growth and threaten fiscal sustainability,” the WEO adds, while acknowledging that a marked de-escalation in trade barriers “could lift global growth.”

To mitigate these threats, the IMF urges coordinated policy action. It calls on countries to work together to restore predictability in trade, bolster debt sustainability, and tackle long‑term structural challenges such as aging populations and migration. By doing so, policymakers can help chart a more stable path for the world economy amid a turbulent policy landscape.