IMF Chief Warns of Rising Global Economic Uncertainty Amid Shifting U.S. Trade Policies

Washington, January11, 2025: Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), issued a warning on Friday about the heightened uncertainty the global economy will face in 2025, primarily due to economic policies, with particular emphasis on the evolving U.S. trade strategy.

Georgieva emphasized that the U.S. economy, given its size and influence, is closely scrutinized around the world. “Given the U.S.’s significant role in the global economy, there is intense international focus on its policy trajectory, especially regarding tariffs, taxes, deregulation, and government effectiveness,” she stated during a media roundtable at the IMF’s headquarters in Washington, D.C.

She highlighted that the greatest source of uncertainty stems from the U.S. trade policy, which could exacerbate challenges for the global economy, particularly for countries and regions that are heavily embedded in international supply chains. “The unpredictability surrounding future trade policies is particularly concerning, as it adds to the existing challenges faced by the global economy,” Georgieva added.

The IMF chief also noted that this global uncertainty is reflected in the financial markets, particularly through an unusual rise in long-term interest rates, despite a decline in short-term rates. “It is highly unusual to see this shift in interest rates, where short-term rates are decreasing, yet long-term rates are on the rise,” she explained.

Another critical issue Georgieva pointed out is the changing expectations in the markets, which are driving fluctuations in asset prices and exchange rates. She warned that the strengthening of the U.S. dollar against both advanced and emerging market currencies could result in higher funding costs for emerging economies, particularly for low-income countries. “Emerging markets are at risk of facing higher borrowing costs, which could further burden already strained economies,” she said.

Georgieva also stressed the importance of addressing the global dilemma of low economic growth coupled with rising debt levels. “Countries must continue to focus on achieving price stability and pursue gradual fiscal consolidation, but they must also implement pro-growth reforms that stimulate long-term economic expansion,” she urged.

In her comments, she further emphasized that simply borrowing more to overcome economic challenges is not a viable solution. “Short-term interest rates may be decreasing, but the rise in long-term yields makes it clear that countries cannot borrow their way out of this situation. They must adopt policies that support sustained growth,” Georgieva added.

As the IMF prepares to release its updated World Economic Outlook (WEO) on January 17, the international community is awaiting further analysis of the global economic landscape and the potential risks posed by shifting U.S. policies. The IMF’s projections will be closely monitored, particularly as they relate to the economic strategies that countries may adopt to navigate the uncertain path ahead.