World Economic Outlook Report: IMF Calls for Policy Fine-Tuning Amid Slower Growth Projections

The International Monetary Fund (IMF) has called on countries to work together in fostering a stable global trade environment, restructuring unsustainable debt, and implementing vital structural reforms to cushion economies from mounting macroeconomic pressures.

In its April 2025 World Economic Outlook (WEO) report, the Fund emphasized the importance of addressing internal economic imbalances, while simultaneously confronting global challenges. According to the IMF, such efforts are critical in rebalancing growth-inflation trade-offs, rebuilding fiscal and monetary buffers, and reviving medium-term growth prospects, as well as reducing global economic disparities.

“The priority for central banks remains fine-tuning monetary policy stances to achieve their mandates and ensure price and financial stability in an environment with even more difficult trade-offs,” the Fund stated in the report.

To mitigate disruptive volatility in foreign exchange markets, the IMF recommended the use of targeted interventions in line with its Integrated Policy Framework. It also underscored the need for macroprudential tools to contain the build-up of financial vulnerabilities and to provide support in the event of economic stress.

The Fund further highlighted the urgency of restoring fiscal space and ensuring long-term debt sustainability, adding that governments must adopt credible medium-term fiscal consolidation plans to meet essential spending needs tied to national and economic security.

“Structural reforms in labour, product, and financial markets would complement efforts to reduce debt and narrow cross-country disparities,” the IMF advised.

Global Growth Outlook Downgraded

Meanwhile, the IMF has revised its global growth projections downward, citing softening demand momentum, heightened policy uncertainty, and ongoing trade tensions in key economies.

Global growth is now projected to decelerate to 2.8 percent in 2025 and slightly recover to 3.0 percent in 2026. These figures reflect a cumulative downgrade of 0.8 percentage point from the 3.3 percent forecast for both years in the Fund’s January 2025 WEO Update. The current projections remain well below the historical average of 3.7 percent recorded between 2000 and 2019.

Advanced economies are expected to grow at a modest pace of 1.4 percent in 2025, with the United States projected to expand by 1.8 percent—0.9 percentage point lower than the January forecast. The downward revision, the IMF explained, is due to greater policy uncertainty, increased trade tensions, and a slowdown in domestic demand.

Growth in the euro area is forecast to slow to 0.8 percent, representing a 0.2 percentage point decline from earlier estimates.

The IMF’s revised projections and policy guidance come at a time of growing concern over global economic fragmentation, persistent inflation, and geopolitical instability—all of which threaten to derail the fragile post-pandemic recovery.

Source: norvanreports.com