By Reshma Kapadia

The head of the International Monetary Fund stood by the group's contrarian view that the U.S. and the global economy aren't on track for a recession, but stressed the toll of uncertainty and the need for swift resolution of trade disputes.

"The worry I hear isn't [about] tariffs but uncertainty," IMF Managing Director Kristalina Georgieva said of the concerns she is hearing from the IMF's 191 members. "Uncertainty is really bad for business so the sooner this cloud hanging over our head is lifted the better the prospects for growth."

She spoke at a press briefing at the IMF's spring gathering of central bankers and finance ministers, held together with meetings of the World Bank.

Officials are looking to get more consistency as countries pursue their own interests, Georgieva said. "The membership is anxious because we were just about to step on the road to more stability after multiple shocks," she said. "Now, growth prospects have weakened and the membership is recognizing that it is very important to have a rules-based system where there is predictability for planning -- for governments and the private sector." The IMF now projects global growth this year of 2.8%, compared with its call of 3.3% in January.

Georgieva's remarks come in a week of whipsawing developments as President Donald Trump and Treasury Secretary Scott Bessent have tried to quell market unease by de-escalating trade tensions. On Tuesday, Trump raised the prospects of lowering the current 145% tariffs on China that make trade prohibitive between the world's two largest economies. However, no talks with China have been arranged, and analysts expect any trade deal to take months, if not years.

Against that backdrop, the IMF's economic projections seem relatively rosy. Many in the private sector that are calling for a recession this year in the U.S. as businesses and consumers adjust to Trump's push to restructure the global economic order -- an approach that has raised questions about the U.S.'s alliances and long-held assumptions about the dollar's role as the world's reserve currency. In its World Economic Outlook released this week, the IMF reduced its growth outlook for the U.S. this year to 1.8% from 2.7% in January. That was the largest of a series of cuts to the organization's economic forecasts.

Georgieva defended the IMF's less dour outlook, noting that the group recognizes there is work under way to resolve trade disputes and reduce uncertainty.

"My glass it is more than 60% full. How can I call it empty? I can't," Georgieva said at a briefing, noting that the risk of U.S. recession stands at 37%. "We don't see -- either in the labor market or indicators of the functioning of the economy -- such a dramatic block of economic activity that would drag growth in the U.S. to below zero."

Still, she cautioned countries could get caught in the economic crossfire. Georgieva said she was especially concerned about Southeast Asian countries -- Vietnam, Malaysia, and Thailand -- that are big exporters and caught in the middle in the trade battle. The good news, she said, is that in recent years, these countries have shored up their fiscal health, giving them a buffer to use government spending to offset the economic damage from trade disruptions. As for China, the IMF lowered its growth forecast for this year to 4% from 4.6%. Georgieva said it would have downgraded forecasts even more if it weren't for stimulus measures from Beijing that are likely to help.

Georgieva had suggestions for Beijing regarding the long term. She said policymakers should rebalance the economy toward domestic consumption, end the turmoil in the property sector, add social protections to people so they don't feel compelled to save, and improve services such as healthcare, education.

Another important change would be for the government to pull back from too much intervention in the economy. "Let the private sector function to its full capacity," Georgieva said. She urged members to resolve trade tensions as swiftly as possible, address imbalances that are fueling tensions -- China needs to embrace a shift to services and the U.S. needs to reduce its fiscal deficits -- and get their financial houses in order. Georgieva also stressed that central bankers couldn't move in lockstep to boost growth as the changes playing out were affecting countries differently. Tariffs are raising inflation risks in some places and creating deflationary pressures elsewhere, she said.

Georgieva's advice for those trying to assess what comes next: Watch the data and inflation expectations as central bankers try to strike a delicate balance between growth and containing inflation.

"Central bank independence is critical for credibility. Protect it," she added. That message came as Trump has complained about Fed Chair Jerome Powell, suggesting he might fire the central banker. He walked back those comments this week as concern that the Fed's independence could be at risk rattled markets.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 24, 2025 11:31 ET (15:31 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.