The forecast includes tariff announcements between February 1 and April 4 by the US and countermeasures by other countries, the IMF said. The world economy is projected to grow at a rate much below the historical 2000-19 average of 3.7%. The US growth forecast for this year was sharply cut by 0.9% to 1.8% due to greater policy uncertainty, trade tensions, and softer demand momentum. Growth is expected to slow further to 1.7% next year.

Eurozone is projected to expand 0.8% this year, which is slower than the 1% forecast in January. The growth forecast for euro area for next year was trimmed to 1.2% from 1.4%. The biggest euro economy and the export hub of the bloc - Germany, is projected to stagnate this year after a contraction last year.

China's GDP growth forecast for this year was lowered to 4% from 4.6% on account of the impact of recently implemented tariffs and fiscal expansion in the budget. The projection for next year was downgraded to 4% from 4.5% due to the prolonged trade policy uncertainty and the existing tariffs.

International Monetary Fund or IMF stated in its latest Global Economic Outlook for 2025 that global headline inflation is expected to decline at a pace that is slightly slower than what was expected in January, reaching 4.3% in 2025 and 3.6% in 2026, with notable upward revisions for advanced economies and slight downward revisions for emerging market and developing economies in 2025. It noted that the priority for central banks remains fine-tuning monetary policy stances to achieve their mandates and ensure price and financial stability in an environment with even more difficult trade-offs.

US:

The US Labor Department said non-farm payroll employment shot up by 177,000 jobs in April, a steady trend. However, the jumps in employment in February and March were downwardly revised to 102,000 jobs and 185,000 jobs, respectively, reflecting a net downward revision of 58,000 jobs. The growth in April primarily reflected job gains in the healthcare and transportation and warehousing sectors. The US unemployment rate came in at 4.2 % in April, unchanged from the previous month.

According to a latest update from the US Federal Reserve, a slowdown in economic activity in the United States could have wide-ranging financial and economic effects and prompt further declines in asset prices. Adverse dynamics could be amplified if interest rates rose at the same time. In the near term, higher interest rates could raise consumer borrowing costs and strain household budgets, increasing the potential for delinquencies. Debt-servicing costs for governments and corporations would similarly increase, which could amplify existing vulnerabilities linked to high leverage and upcoming refinancing needs.

Fed noted in its financial stability report that a pronounced economic slowdown in major advanced and emerging economies could weigh on investor, business, and consumer sentiment and prompt a broader pullback from riskier assets or those with elevated valuations, increasing volatility in financial markets and raising the potential for market dislocations

The US trade balance posted a monthly deficit of $161.99 billion in March, reaching an all-time high. The deficit shot up 9.6%, advance data from the US Census Bureau data showed. This was up from $147.8 billion in February. US exports climbed 1.2% in March on a monthly basis to $180.76 billion, while imports rose 5% to $342.75 billion.

Eurozone:

Euro area economic confidence eased to a four-month low in April largely due to the trade tariff threats, survey data from the European Commission showed. The economic sentiment index dropped to 93.6 in April from 95.0 in the previous month. Sentiment eroded across all sectors in April. Among the big-four economies, morale fell sharply in Italy, while it improved slightly in Germany and Spain. At the same time, the indicator remained broadly stable in France. Consumer confidence also dropped as initially estimated in April. The index dropped to -16.7 from -14.5 a month ago.

The European Central Bank (ECB) cut interest rates for the third time this year, bringing its main interest rate to 2.25% following slowing growth and US President Donald Trump’s recent tariffs. ECB President Christine Lagarde said during the press conference that US tariffs on EU goods, which had increased from an average of 3% to 13%, were already harming the outlook for the European economy.

Eurozone economic growth accelerated in the first quarter, preliminary flash estimates from Eurostat showed. Gross domestic product expanded 0.4% sequentially, faster than the 0.2% growth seen in the fourth quarter of 2024. Year-on-year, economic growth held steady at 1.2% in the first quarter. This was also stronger than forecast of 1%. Meanwhile, economic growth in the EU softened to 0.3% on a quarterly basis from 0.4% in the prior quarter. On a yearly basis, GDP growth remained unchanged at 1.4%.

UK:

UK consumer price inflation weakened in March largely due to the fall in petrol prices, the Office for National Statistics said. Consumer prices registered an annual growth of 2.6%, slower than the 2.8% increase in February. Core inflation that excludes prices of energy, food, alcohol and tobacco, weakened to 3.4%, from 3.5% in the previous month. The annual growth in goods prices eased to 0.6% from 0.8%. Likewise, services inflation posted 4.7%, down from 5% in February. The largest downward contributions to annual inflation came from recreation and culture, and motor fuels.

UK manufacturers witnessed tough operating environment in April this year, with market uncertainties rising, client confidence retreating and cost pressures intensifying, according to S&P Global Ratings. At 45.4 in April, the seasonally adjusted S&P Global UK manufacturing purchasing managers’ index (PMI) remained below the neutral 50 mark for the seventh straight month. The headline PMI was up slightly from March's 17-month low of 44.9 and above the earlier flash estimate of 44.

The UK economy grew by 0.5% month-on-month in February amid a jump in the services output, official data showed. The Office for National Statistics, which published the provisional figures, said a 0.3% expansion in the services sector had driven the surprise jump in growth. In January, services had recorded a 0.1% monthly rise. Production output saw a substantial recovery in February, notching 1.5% month-on-month growth compared to the monthly contraction of 0.5% seen in January.

Japan:

The au Jibun Bank Japan Manufacturing PMI rose to 48.7 in April 2025, up from a flash estimate of 48.5 and March’s 12-month low of 48.4, marking a 10th straight month of contraction, due to weaker demand and worsening concerns about US tariffs.

The Bank of Japan kept interest rates steady and sharply cut its growth forecasts, suggesting uncertainty surrounding US tariffs and the hit to exports could keep policy in a holding pattern for some time. But the central bank projected inflation would stay roughly on course to hit its 2% target in coming years, a sign that risks from U.S. tariffs could delay, but not derail, its rate hike plans. The BOJ cut its economic growth forecast for the fiscal year ending March 2026 to 0.5% from 1.1% projected three months ago. It also slashed its growth forecast to a 0.7% expansion for the following fiscal year from 1.0% in January.

Asia-Ex-Japan:

China's manufacturing sector expansion slowed at the start of the second quarter of the year. A renewed fall in new export orders, which was often attributed to the impact of tariffs, led to a slower and only marginal rise in total new work. As a result, production growth likewise eased on the month. Firms also lowered their inventory levels as business optimism fell. The headline seasonally adjusted PMI – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 50.4 in April, down from 51.2 in March. The latest reading is the lowest recorded since January.

World Bank has noted that amid increasing uncertainty in the global economy, South Asia’s growth prospects have weakened, with projections downgraded in most countries in the region. Stepping up domestic revenue mobilization could help the region strengthen fragile fiscal positions and increase resilience against future shocks, says the World Bank in its twice-yearly regional outlook. It projects regional growth to slow to 5.8 % in 2025—0.4% below October projections—before ticking up to 6.1% in 2026. This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities including constrained fiscal space.

Outlook:

While trade tensions flared up intensely at the start of April, there has been some positive developments thereafter. The US President Donald Trump paused the worst of his sweeping tariffs for 90 days and the White House is now negotiating trade deals with a number of countries. Global risk sentiment improved following this with DOW hitting near one-month high at the start of May. Kristalina Georgieva, Managing Director of the IMF has stated that world’s finance ministers and central bank governors had recognised the importance of reducing uncertainties. This effectively means that the backdrop for global trade scenario has turned stable for now compared to few weeks ago.