IMF Revises Growth Outlook Downward

The International Monetary Fund has sharply reduced its forecast for global economic growth, now projecting the world economy to expand by just 2.8% in 2025 and 3% in 2026, according to its latest World Economic Outlook published in April 2025. This represents a significant downgrade from the January forecast, which had anticipated 3.3% growth for both years.

The revision comes amid what the IMF describes as "rapid escalation of trade tensions and extremely high levels of political uncertainty" that are expected to substantially impact global economic activity. The organization points to shifting policy priorities among governments worldwide as a key factor behind the changing economic landscape.

Trade Tensions Central to Downgrade

At the heart of the IMF's more pessimistic outlook is the recent surge in protectionist trade measures, particularly those implemented by the United States and the retaliatory actions from its trading partners. The report specifically highlights the introduction of "almost universal US tariffs on April 2," which have pushed effective tariff rates to levels not seen in the past century.

The IMF characterizes these tariff increases as "a serious negative shock to growth" in their own right. However, the unpredictable manner in which these measures have unfolded has further complicated economic forecasting, leading the IMF to label its April review as a "reference forecast" based on information available as of April 4, 2025.

This baseline projection incorporates the April 2 tariffs and initial reactions from trading partners, but the IMF has also prepared several alternative global growth scenarios under different trade policy assumptions, acknowledging the high degree of uncertainty surrounding future trade relations.

Regional and Country-Specific Outlooks

While the report provides a broad global outlook, it maintains specific forecasts for individual economies. For Ukraine, the IMF has kept its growth projections unchanged at 2% for 2025 and 4.5% for 2026, suggesting that the country's recovery trajectory remains on track despite the global headwinds.

Inflation Outlook Remains Challenging

Beyond growth concerns, the IMF also notes that global core inflation is expected to decline somewhat slower than previously anticipated. The updated forecast projects core inflation to reach 4.3% in 2025 and 3.6% in 2026, suggesting that price pressures will remain a challenge for policymakers around the world.

This inflation outlook compounds the difficulties facing central banks, which must now navigate the delicate balance between supporting growth amid trade tensions and continuing to bring inflation back to target levels.

Structural Shifts in Global Trade

The report comes against a backdrop of fundamental changes in the global trading system. IMF Managing Director Kristalina Georgieva has previously noted the increasing fragmentation of international trade, with national security concerns gaining prominence over cost considerations in production decisions.

This trend toward "self-sufficiency" represents a significant shift from the decades-long movement toward greater global economic integration. The steel industry is specifically mentioned as an example where security considerations are increasingly favoring local production over imports, regardless of cost differentials.

Alignment with WTO Projections

The IMF's downgraded outlook aligns with recent projections from the World Trade Organization, which has dramatically revised its forecast for global merchandise trade in 2025. The WTO now expects trade to contract by 0.2%, a stark reversal from its October projection of 3% growth.

This correlation between the IMF and WTO forecasts underscores the severity of the current trade tensions and their potential impact on both economic growth and international commerce.

Implications for the Steel Industry

For the global steel sector, the IMF's downgraded growth forecast presents significant challenges. Steel demand is closely tied to economic growth, particularly in construction, infrastructure, and manufacturing sectors. A slower-growing global economy typically translates to reduced steel consumption.

The specific mention of steel in the context of shifting trade priorities is particularly relevant. As countries increasingly prioritize domestic steel production for national security reasons, the industry may see further fragmentation of global supply chains and potentially higher costs for steel-consuming industries.

Outlook and Uncertainties

The IMF's revised forecast highlights the increasing uncertainties facing the global economy. The organization's decision to present its April projections as a "reference forecast" rather than a firm prediction underscores the difficulty in making economic projections amid rapidly evolving trade policies.

The range of alternative scenarios prepared by the IMF suggests that growth outcomes could vary significantly depending on how trade tensions develop. This uncertainty itself may weigh on business investment and consumer confidence, potentially creating a self-reinforcing negative cycle.

For policymakers, the challenge will be to navigate these uncertainties while addressing persistent inflation and supporting economic growth. The balancing act has become considerably more difficult with the addition of escalating trade tensions to an already complex global economic environment.

Key Takeaways:

• IMF has downgraded its global growth forecast to 2.8% for 2025 and 3% for 2026, down from 3.3% for both years

• Escalating trade tensions and political uncertainty are cited as major factors behind the revision

• Recent US tariff measures implemented on April 2, 2025, have pushed tariff rates to levels not seen in a century

• Global core inflation is expected to decline more slowly than previously anticipated, reaching 4.3% in 2025

• Ukraine's growth forecast remains unchanged at 2% for 2025 and 4.5% for 2026

• The IMF notes a trend toward economic fragmentation and prioritization of national security over cost efficiency

• The WTO has similarly downgraded its outlook, now projecting a 0.2% contraction in global merchandise trade for 2025

• These developments present significant challenges for the steel industry, which is sensitive to both economic growth and trade policies