Global economy stronger than feared but still faces challenges – IMF
The global economy is showing surprising resilience, according to the head of the International Monetary Fund (IMF), even as long‑term growth prospects remain disappointing. While conditions are better than many predicted, the world still has significant work to do to reach a healthier growth path.
Global growth: better than feared but not enough
Speaking to reporters in Washington, IMF Managing Director Kristalina Georgieva said the world economy is performing “better than feared, but worse than we need.” She indicated that the Fund now expects global growth to slow only slightly this year and next, underpinned by stronger-than-expected performance in the United States and select advanced, emerging market, and developing economies.
Her remarks come ahead of the upcoming meeting of finance ministers and central bank governors from around the world, scheduled to take place next week in Washington during the annual IMF–World Bank meetings.
Trade tensions and multiple shocks
Georgieva acknowledged that the global economy has, to date, avoided a severe downward spiral triggered by trade tensions. She cited several factors in support of this relative stability: improved fundamentals in policy, flexibility and adaptability in the private sector, lower-than-expected tariff escalation, and steady financial conditions.
“All signs point to a world economy that has generally withstood acute strains from multiple shocks,” she said. She added, “The world has avoided a tit-for-tat slide into trade war — so far.”
Still, she cautioned that the full effects of existing tariffs have yet to manifest. The average U.S. tariff rate has reportedly fallen from 23 percent in April to about 17.5 percent, though the effective rate of around 10 percent remains “far above” global norms. The ultimate economic consequences of these trade policies, Georgieva warned, are yet to fully unfold.
Medium‑term outlook and structural shifts
Over the medium term, the IMF continues to forecast roughly 3 percent global growth, in line with earlier projections. That is below the pre‑COVID average of 3.7 percent. Georgieva noted that economic growth patterns have shifted: China’s growth has been decelerating gradually, while India is gaining prominence as a new engine of global expansion.
To support sluggish growth elsewhere, she urged countries to move quickly to lift output, rebuild fiscal buffers, and address large trade imbalances. The Fund’s advice differs by region: for Asia, greater internal trade, stronger services sectors, and improved financial access could potentially boost output by up to 1.8 percentage points in the long term; for Africa, she emphasized business‑friendly reforms and stronger implementation of the African Continental Free Trade Area, which she estimated could lift real GDP per capita by more than 10 percent.
Europe, U.S., China: tailored prescriptions
Georgieva reserved pointed critique for Europe, where she urged the European Union to adopt more decisive reforms. She proposed appointing a “single market czar” to streamline regulatory structures, consolidate authority, and push forward deeper integration in finance and energy. Europe, she said, needs to match the dynamism of private enterprise in the U.S., even if “there will be some sacrifices on the way.”
For the United States, Georgieva urged the administration to confront its federal deficit and create incentives for household saving rather than overreliance on fiscal stimulus. And for China, she reiterated the need for ongoing fiscal reforms to shift toward more consumption-driven growth and reduce dependence on industrial policy.
Conclusion
In short, the IMF’s outlook is cautiously optimistic. The global economy is holding up better than many anticipated, but lingering uncertainties mean that risks are far from over. With structural headwinds and global imbalances still unresolved, Georgieva’s message is clear: now is not the time for complacency. Countries must act boldly and swiftly if they hope to transform fragile growth into long‑lasting prosperity.
