By Andrea Shalal
WASHINGTON (Reuters) -The International Monetary Fund warned on Friday that risks related to trade tensions continue to cloud the global economic outlook and uncertainty remains high despite some increased trade and improved financial conditions.
IMF First Deputy Managing Director Gita Gopinath said the fund would update its global forecast later in July given “front-loading ahead of tariff increases and some trade diversion,” along with improved financial conditions and signs of continued declines in inflation.
In April the IMF slashed its growth forecasts for the United States, China and most countries, citing the impact of U.S. tariffs on imports now at 100-year highs and warning that rising trade tensions would further slow growth.
At the time, it cut its forecast for global growth by 0.5 percentage points to 2.8% for 2025, and by 0.3 percentage points to 3%. Economists expect a slight upward revision when the IMF releases an updated forecast in late July.
Gopinath told finance officials from the Group of 20 major economies who met this week in South Africa that trade tensions continued to complicate the economic outlook.
“While we will update our global forecast at the end of July, downside risks continue to dominate the outlook and uncertainty remains high,” she said, in a text of her remarks.
She urged countries to resolve trade tensions and implement policy changes to address underlying domestic imbalances, including scaling back fiscal outlays and putting debt on a sustainable path.
Gopinath also underscored the need for monetary policy officials to carefully calibrate their decisions to specific circumstances in their countries, and stressed the need to protect central bank independence. This was a key theme in the G20 communique released by finance officials.
Gopinath said capital flows to emerging markets and developing economies remained sluggish, but resilient, in the face of increased policy uncertainty and market volatility. For many borrowers, financing conditions remained tight.
For countries with unsustainable debt, proactive moves were essential, Gopinath said, repeating the IMF’s call for timely and efficient debt restructuring mechanisms.
More work was needed on that issue, including allowing middle-income countries to access the G20’s Common Framework for Debt Restructuring, she said.
(Reporting by Andrea ShalalEditing by Frances Kerry)
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