Despite heightened fears over a global economic slowdown sparked by escalating trade tensions, the International Monetary Fund (IMF) has stated that the world economy will avoid recession. This comes in response to U.S. President Donald Trump’s new “Liberation Day” tariffs, announced on April 2, which triggered sharp declines in global stock markets and a rise in economic uncertainty.
In its latest forecast, the IMF acknowledged a significant decline in global share prices and a growing erosion of trust between nations. However, it stopped short of predicting a recession, stating that while growth projections would be revised downward, the outlook remains cautiously optimistic.
“Trade tariff uncertainty is literally off the charts,” the IMF noted, underscoring the instability caused by the recent wave of protectionist policies. Nonetheless, IMF Managing Director Kristalina Georgieva emphasized that “a better balanced, more resilient world economy is within reach. We must act to secure it.”
The IMF’s message comes in contrast to warnings from other financial institutions. The World Trade Organization (WTO) has forecast a decline in global trade volumes for the year due to the tariffs, and the Bank of England warned that trade tensions have significantly increased the risk to global economic growth and financial stability. The European Central Bank (ECB) also responded to the growing uncertainty by lowering its key interest rate.
Georgieva urged governments to strengthen domestic policy frameworks and cooperate more closely on global issues. She called on European nations to reduce internal restrictions on trade in services and deepen the single market. For China, she recommended bolstering the social safety net to reduce excessive precautionary savings, while the U.S. was advised to address its high public debt levels.
As firms slash spending and investment in response to uncertainty, the IMF’s call for coordinated global action comes at a crucial time. Though the immediate threat of recession may have been averted, the global economy remains vulnerable, and the path forward will require strategic, inclusive, and cooperative policymaking.
