Opinion From IMF, a note on resilience in face of uncertainty

Kristalina Georgieva, the head of the International Monetary Fund (IMF), had a stark message for global policymakers, central bank governors, and global business leaders in the recent annual meetings of the IMF and the World Bank. She warned them to “buckle up” since “uncertainty is the new normal” and it is here to stay. “The average person today is much better off than, say, 30 years ago, but the averages conceal deep undercurrents of marginalisation, discontent, and hardship. Many people in many places — especially the young — are taking their disappointment to the streets… demanding better opportunity. All of this plays out against a backdrop of deep transformations: in geopolitics; in technology; in demographics…” she said in the curtain raiser to the latest World Economic Outlook (WEO). On the face of it, the global outlook shows little change. The global growth rate is projected to slow down marginally from 3.3 per cent in 2024 to 3.2 per cent in 2025 and to 3.1 per cent in 2026. Still, this outlook is an improvement relative to the July WEO Update, and cumulatively, it is just 0.2 percentage point below the forecasts made in last October. But the apparent inactivity in data masks fast-changing and complex undercurrents.

In April, as US President Donald Trump unleashed a wave of punitive tariffs, there was a genuine fear that the move could be the last straw that breaks the back of the global economy. Since 2020, economies have been buffeted from sharp and sudden growth shocks on the one hand and equally sharp and sudden waves of inflation on the other. But six months on, it appears that the world economy might have survived the worst of Trump’s tariffs without succumbing to recessions. The IMF has pointed out the key role of astute fiscal and monetary policies — governments not retaliating with counter tariffs while central bankers continue to contain prices. Equally important has been the role of the private sector in ensuring that the economy adapts to the fast-changing conditions. This is best seen in how companies across the world front-loaded imports before tariffs spell havoc. Lastly, global markets have surged despite uncertainty as an Artificial Intelligence-led boom papers over other weaknesses.

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The IMF has also sounded notes of caution. The nature of the global economy is such that the situation can turn adverse quickly. “Global resilience hasn’t been fully tested,“ said Georgieva, pointing to the surge in the global demand for gold, a move that suggests growing nervousness. Similarly, the sentiment on the stock market can “turn on a dime” as the AI-boom is beginning to resemble the Dotcom bubble of the late ’90s, even as governments continue to see their debt to GDP rise. It is a matter of pride that the IMF singled out India for turning into a key engine of global growth, but under the circumstances, it is best not to let the guard down.