Global economic outlook: April 2025

Trade tensions and related uncertainties point to continued turbulence in financial markets. Corrections in equity prices were pronounced and widespread following the initial announcement of reciprocal tariffs on April 2. While the subsequent pause on April 9 led to strong initial rebounds, market conditions remain choppy, and risk aversion is elevated. Given growing concern over a possible waning of foreign appetite for US Treasurys, the jump in yields in early April was a worrying sign. While the acute near-term risk of a negative feedback loop between market turmoil and recession has diminished, the chronic problems of US policy volatility, related uncertainties and adverse economic spillovers are likely to linger.

We have cut our global growth forecasts for 2025 and 2026 in April’s update, reflecting the issues above. Our annual global real GDP growth forecast for 2025 has been lowered from 2.5% to 2.2%. Back in October 2024, prior to the US elections, our forecast was close to 3%. Next year’s global real GDP growth forecast has been reduced from 2.7% to 2.4%. In both years, projected global growth would be the weakest since the global financial crisis of 2008–09, excluding the COVID-19 pandemic. Risks are to the downside.

April’s downward revisions to our growth forecasts are broad-based across economies. Our forecasts for annual US real GDP growth in 2025 and 2026 have been cut by 0.6 and 0.4 percentage point, respectively, to 1.3% and 1.5%. While a technical recession in the US is not our base case, it was looking like an increasingly close call prior to the pause on reciprocal tariffs. In Canada, we continue to forecast GDP contraction in mid-2025. In mainland China, as trade tensions with the US escalate, sub-4% annual growth rates are now projected this year and next. Our forecasts for growth in India, while still outperforming, have also been lowered. Western Europe’s near-stagnation is also forecast to continue in the near term, although fiscal policy should support eurozone growth from 2026, contributing to a modest global pickup.

The signals from S&P Global’s Purchasing Managers IndexTM data are not encouraging. Even prior to the chaos surrounding reciprocal tariffs, the global composite output index registered its weakest performance in five quarters during the first quarter of 2025. Moreover, the surveys of business expectations have deteriorated across almost all major developed and emerging economies, with tariffs cited as the prime cause for concern. The price indexes for global manufacturing have also been picking up, with the steepest increases in input and output prices occurring in the US, again linked to tariffs. A silver lining amid the darkening clouds is the softening of services price indexes.

Our global and North American consumer price inflation forecasts for 2025 and 2026 were again revised upward in April. This continues the trend evident since late 2024, primarily reflecting shifts in US trade policy. The monthly consumer price inflation rate for core goods, which we calculate for the Group of Five (G5) economies, has been picking up since late 2024. Further increases are likely as the impact of rising tariffs becomes more widespread. In line with the PMI data, the downward trend in services inflation in the G5 economies has continued. February’s rate fell below 4% for the first time since March 2022.

In our base case, we continue to expect limited easing by the US Federal Reserve this year. Our forecast remains for just one cut of 25 basis points in December, given the projected pickup in inflation in the coming months. A series of cuts are still forecast in 2026 as inflation worries recede. At the time of writing, futures markets discount about 80 basis points of Fed cuts this year, versus over 100 basis points at the height of the market turmoil. If the Fed cuts quicker than we expect, it will likely be owing to a rising recession risk, providing little comfort. Additional rate cuts in Western Europe are forecast to materialize more quickly than in the US. This is a key reason we expect the pace of recent currency appreciations versus the US dollar to moderate. Projected yen gains continue to reflect the expected divergence of monetary policy.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.