The International Monetary Fund (IMF) has lowered its global real gross domestic product (GDP) growth forecast to 2.8% for 2025 and 3% for 2026 in its April World Economic Outlook (WEO), a sharp downgrade from the January projections of 3.3% for both years. The move reflects growing global volatility, escalating trade tensions, and a sharp pivot in international economic policy frameworks.
The report attributes the downward revision to newly devised tariff rates and what it calls a “highly unpredictable” policy environment that is reshaping trade flows and investor sentiment worldwide.
Global economy at a critical juncture
“Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments,” the IMF stated. “Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects. Scaling back international cooperation could jeopardize progress toward a more resilient global economy.”
The IMF emphasized that the global economy is standing at a “critical juncture,” with major shifts in policy, particularly in trade and tariffs, threatening the pace and stability of the recovery.
Emerging markets, the Middle East face slower growth
The forecast for emerging and developing economies has also been revised downward. These regions are now expected to grow by 3.7% in 2025 and 3.9% in 2026, down from 4.2% and 4.3% respectively in the January outlook. The Middle East and Central Asia will see growth slow to 3% and 3.5% for 2025 and 2026, a decline from the earlier forecast of 3.6% and 3.9%.
The IMF warns that the downgrade is not isolated to a particular region—global headwinds are now broadly affecting both advanced and developing economies.
U.S. tariff escalation spurs financial market disruptions
A significant portion of the forecast revision stems from recent developments in U.S. trade policy. A White House statement released on April 2 announced the implementation of a reciprocal tariff on all countries trading with the United States. This was followed by an April 9 announcement of a substantial increase in tariffs on Chinese imports, raising them to 125%, with an additional 20% fentanyl-related tariff, bringing the total to a staggering 145%.
The IMF report cited these moves as triggering “historic drops” in key equity indices and sharp increases in bond yields.
Trade war chills global trade, inflation outlook
During an IMF press briefing held on April 22, Pierre-Olivier Gourinchas, Director of the IMF’s Research Department, warned of the significant impact that escalating trade tensions and tariffs could have on global trade flows and inflation.
“While global growth remains well above recession levels, all regions are expected to be negatively affected this year and next,” Gourinchas stated. “The global disinflation process is continuing, but at a slower pace, with inflation revised upward by 0.1 percentage point in both years. These trade tensions will severely impact global trade. We now project global trade growth to fall sharply—from 3.8 percent last year to just 1.7 percent this year.”
He also addressed the longer-term consequences of ongoing tariff policies. “What is the impact of tariffs in the medium and long term—not just for this year and next, but further ahead? Our assessment is clear: the impact is negative. In our report, we include a detailed analysis of the long-term implications if current tariffs are maintained, and the findings show a consistently adverse effect across all regions.”
Gourinchas acknowledged that while some countries may benefit from trade diversion depending on how tariffs are structured, the overall outlook remains bleak. “There are nuances—some economies might see short-term gains. But the broader picture is clear: tariffs are a drag on the global economic outlook in the short, medium, and long term.”
Egypt bucks the trend with upward revision
In contrast to the global downtrend, Egypt’s real GDP growth projections have been revised upward. The country is now forecast to grow by 3.8% in 2025 and 4.3% in 2026, compared to previous estimates of 3.6% and 4.1%.
While the report did not elaborate on the rationale behind the improved outlook, it noted that a sharp decline in consumer prices is expected, from 33.3% in 2024 to 19.7% in 2025, and then to 12.5% in 2026. Egypt’s current account balance is also projected to strengthen, rising to -5.8% in 2025 before improving further to -3.7% in 2026, following an estimated -5.4% in 2024.
The Minister of Planning, Economic Development, and International Cooperation emphasized that these projections highlight the concrete outcomes of the structural reforms undertaken by the state, aimed at improving the investment climate, empowering the private sector, and strengthening the economy’s ability to withstand external shocks in a statement published on 26 April
According to the statement in FY2024/2025, non-petroleum manufacturing activity recorded positive growth for the third consecutive quarter, rising by 17.74% compared to the same period in the previous fiscal year, when the sector had contracted by 11.56%.
The rebound in industrial performance was also evident in the manufacturing index (excluding crude oil and petroleum products), which registered a 17.7% increase in the second quarter of fiscal year 2024/2025. Key contributors to this growth included the automotive sector (up 73.4%), ready-made garments (61.4%), beverages (58.9%), and textiles (35.3%).
