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On April 22, 2025, the International Monetary Fund (IMF) released two major reports: the World Economic Outlook (WEO) and the Global Financial Stability Report (GFSR). Given the extensive nature of both documents, this review will focus on the key highlights from each report, starting with the WEO and followed by the GFSR.

World Economic Outlook, April 2025

After a prolonged period of shocks, the global economy appeared to be on a path of steady—albeit modest—recovery. However, as governments recalibrate their policy priorities, uncertainty has risen to unprecedented levels.

According to the WEO, global growth projections have been significantly downgraded from the January 2025 WEO Update, largely due to a highly volatile climate and tariff levels not seen in a century. The IMF’s forecasts account for the U.S. tariff announcements and subsequent countermeasures from other countries between February 1 and April 4. As a result, the IMF has revised its global growth forecasts downward by approximately 0.8 percentage points, projecting growth at 2.8% for 2025 and 3% for 2026.

The WEO also provides an alternate estimate excluding the impact of April tariffs. In this scenario, global growth would have declined only slightly by 0.2 percentage points, to 3.2% for both 2025 and 2026.

While headline inflation is expected to decline globally, the pace of disinflation is slower than previously anticipated. The IMF has revised global inflation upward by around 0.1 percentage points annually.

Despite resilience in global trade to date—helped by businesses rerouting supply chains—the outlook has weakened. Global trade growth is projected to slow significantly, falling to 1.7% in 2025, marking a notable downward revision.

The WEO highlights several downside risks: escalating trade tensions, tighter global financial conditions, and increasing trade policy uncertainty. A sustained decline in international cooperation could impede the development of a stronger global economy.

The report advises countries to address domestic policy gaps and structural imbalances while fostering a stable, predictable trading environment. Chapter 2 recommends policies to encourage healthy ageing and increase labor force participation among women and older adults. Chapter 3 emphasizes the importance of better integration of migrants and refugees, as well as tackling skill mismatches to enhance productivity growth.

Global Financial Stability Report (GFSR), April 2025

Chapter 1 of the GFSR assesses growing threats to global financial stability amid heightened asset price volatility. It highlights three major vulnerabilities:

Persistently high valuations across key markets.

Tighter links between highly leveraged financial institutions and banking systems.

Elevated risks of market turmoil and debt sustainability challenges for highly indebted sovereigns.

Chapter 2 underscores that major geopolitical events could trigger sharp declines in stock prices and higher sovereign risk premiums, threatening macro-financial stability.

Policy Recommendations

The GFSR stresses the need to ensure that non-bank financial institutions (NBFIs) remain resilient to shocks while continuing to contribute positively to the economy. It recommends enhanced reporting requirements to distinguish healthy financial activities from risky behavior and suggests stronger policies to manage leverage and interconnectedness vulnerabilities.

The report emphasizes the importance of completing the implementation of Basel III and other regulatory frameworks to maintain robust capital and liquidity buffers across banking sectors. It also calls for strict management of bank exposures to NBFIs.

Given the rise in sovereign debt levels, the GFSR recommends promoting central clearing of bonds and mitigating counterparty risks to strengthen bond market resilience. Additionally, it advocates for building strong domestic bond markets in emerging economies and using frameworks like the IMF-World Bank Medium-Term Debt Management Strategies to optimize debt structure and financing costs.

IMF on India in the WEO, April 2025

In its latest WEO, the IMF has slightly revised down India’s growth forecasts for FY26 and FY27 by 30 basis points and 20 basis points, respectively. India’s economy is now projected to grow at 6.2% in FY26 and 6.3% in FY27.

Despite the downgrade, India’s growth outlook remains relatively stable, primarily driven by robust private consumption, particularly in rural areas. The downward revision reflects heightened global trade tensions and uncertainty.

Conclusion

The April 2025 WEO highlights the growing threat of an intensifying global trade war and the need for countries to maintain stable trade policies and international cooperation while addressing internal structural weaknesses.

The GFSR underlines the importance of enhancing the resilience of financial institutions and markets to safeguard against emerging risks.

One positive takeaway is that the IMF remains broadly optimistic about India’s economic prospects, citing resilient private consumption as a key growth driver. Nevertheless, India must navigate carefully amid global uncertainties and potential downside risks stemming from tariff conflicts.

Although the pace may be slightly slower, India is projected to remain one of the fastest-growing emerging economies in the coming years.