IMF President "Growth rate downgrade inevitable… Trump tariff impact, not a recession"

Kristalina Georgieva International Monetary Fund President (Source: EPA)

The International Monetary Fund (IMF) is expected to lower its global growth forecast in the forthcoming World Economic Outlook. Kristalina Georgieva, IMF President, said in a speech held at the Washington DC headquarters on the 17th (local time), "The upcoming forecast will include a notable downward adjustment, but it is not a recession."

Georgieva, in this speech ahead of the IMF-World Bank (WB) Spring Meetings starting on the 21st, strongly warned about the impact of escalating global trade conflicts centered around recent broad tariff policies by President Trump on the world economy. She stated, "There is substantial uncertainty in trade policy, leading to increased financial market volatility and global stock declines."

She pointed out, "Considering the recent tariff increases, exemptions, augmentations, and delays in the U.S., the effective tariff rate has returned to levels from decades ago," adding "Other countries are responding to this, and ripple effects are emerging." Furthermore, she emphasized, "As confrontations among major countries intensify, small advanced or emerging market countries are increasingly exposed to greater shocks."

Regarding the economic costs of trade conflicts, she presented three major consequences. The first is cost increases due to rising uncertainty, the second is growth slowdown due to trade barriers, and the third is long-term productivity decline caused by protectionism. She diagnosed, "Amid the structural reorganization of the global trade system, the resilience of the world economy is again being tested."

Recommendations for national governments continued. Georgieva emphasized reinforcing domestic reform efforts and stated that maintaining flexible and credible monetary policy for price stability is necessary. Especially for emerging markets, she suggested increasing currency flexibility and foreign debt management capacity for shock absorption.

On a country-by-country basis, she pointed out that the U.S. should prioritize solving the federal debt issue as the foremost macroeconomic policy, and advised China to expand private consumption. For Europe, she recommended strengthening internal capital market integration and eliminating service trade barriers to enhance economic unity.

Meanwhile, the IMF is scheduled to release this year's World Economic Outlook (WEO) on the 22nd. This forecast is likely to be the first official growth rate adjustment announced after the Trump administration's tariff policies have been implemented.