According to reports from Reuters and Bloomberg, on April 17th, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated at the IMF headquarters that due to the "reboot" of world trade led by the United States, the global economy will slow down, but it is not expected to fall into a recession.

The upcoming IMF Spring Meeting will focus on U.S. President Trump's tariff policies and the turmoil in the global financial markets. Georgieva revealed that in the latest edition of the World Economic Outlook to be released, the IMF will significantly downgrade growth forecasts, but believes there won't be a recession. Additionally, inflation forecasts for some countries will be revised upwards.

Previously, the IMF forecast showed that global economic growth is expected to be 3.3% in both 2025 and 2026, which is lower than the historical average of 3.7% between 2000 and 2019.

A survey conducted by Reuters among multiple economists predicted that aggressive tariff policies in the U.S. would cause a significant slowdown in the U.S. economy this year and next year. The probability of an economic recession within the next year would rise from 25% last month to 45%, the highest level since December 2023.

Georgieva said that recently, the effective tariff rate in the U.S. has clearly risen to the highest level in several generations, and other countries have already responded.

This has triggered unprecedented uncertainty in trade policies and extreme fluctuations in financial markets.

Recently, the uncertainty in trade policies has "gone off the charts." IMF website

Georgieva said: "The situation we are seeing largely results from damage to trust, including trust in the international system and trust between nations."

She warned that the current tensions will lead to three impacts. First, uncertainty comes with high costs; the longer it persists, the higher the cost. Second, rising trade barriers will immediately impact growth.

She added that, in the long run, protectionism will reduce productivity, especially in smaller economies. Shielding industries from competition reduces the motivation to efficiently allocate resources. Productivity and competitiveness improved through trade will also decline.

Georgieva warned that prolonged uncertainty will increase the risk of financial market stress. She specifically reminded that the yield curve of U.S. Treasury bonds is showing a "smiling" upward trend, but this change should be seen as a warning.

The table on the top right shows the trend of U.S. Treasury yields. IMF website

"If the financial environment deteriorates, everyone will suffer," she warned.

What can countries do? Georgieva reminded that all countries must double their efforts to handle domestic affairs while re-focusing on internal and external macroeconomic imbalances.

Georgieva also called for ensuring that countries can cooperate in a multipolar world, building a more resilient global economy rather than moving toward fragmentation.

"One thing I learned during crisis periods is that ideas and reality are equally important. Negative changes in perceptions may cause significant harm to economic performance," she believed. "Whether large or small, countries can and should do their part to strengthen the global economy together in an era of increasingly frequent and severe shocks."

This article is an exclusive contribution by Guancha Observer, unauthorized reproduction is prohibited.

Original source: https://www.toutiao.com/article/7494456904300429858/

Disclaimer: The views expressed in this article are those of the author and welcome your opinions expressed through the [upvote/downvote] buttons below.