IMF chief does not expect global recession despite tariffs

Kristalina Georgieva warns rising trade barriers will lead to higher inflation for some countries

IMF managing director Kristalina Georgieva said she 'would like to see reduction in uncertainty'. Reuters

International Monetary Fund managing director Kristalina Georgieva on Thursday said the global economy is expected to avoid a recession this year, despite elevated uncertainty surrounding tariffs.

Her remarks come ahead of next week's IMF and World Bank Spring meetings, where President Donald Trump's tariff regime is likely to dominate the agenda, including its updated World Economic Outlook.

“In it, our new growth projections will include notable markdowns, but not recession,” Ms Georgieva said at the fund's headquarters in Washington.

The IMF is also expected to raise its inflation forecast for some countries because of tariffs. The IMF in January projected global growth of 3.3 per cent this year and in 2026.

Mr Trump has spent his first few months in office implementing − and sometimes reversing − a series of tariffs against America's trade partners. That has led to private-sector economists revising their economic forecasts to lower growth and higher inflation.

Although Mr Trump has pared back tariffs on most countries, he has intensified his trade war with China. Washington has hit China with tariffs totalling up to 145 per cent, while Beijing has responded with duties of 125 per cent.

“We would like to see reduction in uncertainty, and it's hard to get there if the two largest economies are still fighting,” said Ms Georgieva.

Uncertainty has shaken global markets, with Wall Street leading a steep sell-off. Meanwhile, the yield on the 10-year Treasury has spiked while the dollar has depreciated.

“Such movements should be taken as a warning,” she said, arguing that greater clarity would allow for business and consumers to plan.

The IMF chief also warned against a “drift to division” and that shifting trade policies are testing economies' resilience to large shocks.

“This is a reminder that we live in a world of sudden and sweeping shifts,” said Ms Georgieva.

Still, she said trade tensions have been bubbling over for a long time, leading to an erosion of trust between countries.

“Trade distortions … have fed negative perceptions of a multilateral system seen to have failed to deliver a level playing field,” she said.

Smaller advanced economies and emerging markets will be the most exposed to tariffs, she said, while lower-income countries will face the additional challenge of less aid.

The IMF chief urged countries to use the new shift in trade to establish a better balanced and more resilient world economy”.

For the US, she said this means to lower federal debt. Meanwhile, she urged China to boost low private consumption and for Europe to improve competitiveness by deepening the single market.

“Reforms and rebalancing are for everyone,” said Ms Georgieva, referring to the GCC, Africa and Asia.