IMF April 2025 World Economic Outlook – Key Forecast Updates for Australia

The IMF released its World Economic Outlook at the end of April. The Outlook is the first to include the impact of the Trump tariffs on the global and individual country economies. Not surprisingly, that impact is expected to be slower economic growth and increased downside risks across the globe.

Economic growth is forecast to slow in 2025 and 2026

The global economy is now forecast to grow at +2.8% in 2025, revised down half a percentage point compared to the previous quarter’s economic outlook. The impact on the United States is much higher with growth being downgraded by -0.9% compared to the previous forecast from January this year.

China, India, Canada all see their growth forecasts cut by -0.6% while Mexico’s growth forecast is slashed by -1.7% compared to the January forecast. Mexico’s economy is now forecast to shrink by -0.3% in 2025.

Australia’s GDP growth is now expected to grow by +1.6%, down from 2.1% – a drop of -0.5% between the January and April outlooks (see more detail about material changes to forecasts for Australia on the following pages.

Uncertainty abounds

Importantly, the IMF growth projections take into account the tariff announcements made between 1 February and 4 April by the United States and other countries announcing retaliatory tariffs in response. These dates do not include the escalation of tariffs between the United States and China that have resulted in US tariffs of 145% on Chinese imports into the United States or the 125% tariffs impose by China on US goods. The forecasts also do not include the 90-day pause on the US reciprocal tariffs above 10%. They also do not take into account other initiatives that will impact trade that have been announced by the United States including, for example, levies being placed on Chinese shipping that visit US ports.

An ever-changing trade policy environment has consequences far beyond affecting the IMF’s forecasting accuracy. As the IMF points out, in the US, consumer, business and investor sentiment that was optimistic at the start of the year have become notably pessimistic as uncertainty around tariffs has increased. Uncertainty leads to investment decisions being deferred and hiring of employees being delayed. Downside risks are in increasing – the IMF modelling suggests that the risk of a US recession occurring in 2025 is now at 37% up from 25% in October 2024 while the risk that US headline inflation will rise above 3.5% is now more than 30% compared to 13% back in October 2024.

Key changes in the IMF forecast for Australia for 2025

• GDP growth slows from 2.1% to 1.6% in 2025
• The Australian dollar is forecast to appreciate by 1%
• Investment as a % of GDP increases while savings as a % of GDP is forecast to fall
• The Current Account moves to a larger deficit than previously forecast
• Growth in the volume of goods exported slows from over 3.3% to 1.6%
• Inflation is forecast to be slightly lower than in the October 2024 forecast as is the rate of unemployment

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The IMF April 2025 World Economic Outlook Summary of key forecast updates for Australia.