IMF slashes global growth forecast amid weak oil demand and tariff war

Escalating trade tensions between the top oil consumers – the US and China – are expected to weigh on global economic growth in 2025, the US-headquartered financial agency said in its April World Economic Outlook (WEO).

IMAGE: Oil refineries along with a downward arrow depicting decline in oil demand. Getty Images

The agency that represents 190 member countries projects global gross domestic product (GDP) growth to drop to 2.8% in 2025, down from 3.3% projected earlier. In 2026, it expects world GDP to grow by 3%.

The tariff-saga between Washington and Beijing has led to the drop in oil prices, according to the IMF. Oil prices have declined in “a response to the round of tariffs, as well as the uncertainty about global growth,” Petya Koeva Brooks, deputy director of IMF’s research department noted.

Countries exporting commodities like crude oil are expected to face lower export revenues due to declining oil prices, the IMF said. For oil importers, lower oil prices will “feed into” lower headline inflation. “It's going to also provide some modest support to economic activity there.”

“It’s the weakening of global activity that is driving the decline in [oil] prices. There has been some increase in supply coming from OPEC Plus countries, but broadly speaking, the decline is mostly coming from weaker demand,” IMF’s director of research department Pierre‑Olivier Gourinchas said.

The cut in global GDP growth forecast from 3.3% to 2.8% was “a slightly larger downgrade that the one it [IMF] made after Russia’s invasion of Ukraine in February 2022,” VANDA Insights’ founder and analyst Vandana Hari remarked.

By Aparupa Mazumder

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