IMF Welcomes Trump-Xi Talks, Warns 2.5% Growth on $100 Oil
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- IMF spokesperson Julie Kozack welcomed the Trump-Xi dialogue, saying it is 'very important' that the world's two largest economies engage at the highest level and that reduced trade tensions benefit both economies and the global economy
- Global GDP growth is projected to fall to 2.5% in the IMF's middle 'adverse scenario,' down from a 3.1% reference forecast that assumes a quick end to the conflict, and from 3.4% growth in 2025
- Crude oil remains above US$100 (S$128) per barrel due to the Middle East war and Iran's closure of the Strait of Hormuz, with the adverse scenario assuming $100 oil for the full year alongside tightening financial conditions and rising inflation expectations
- Kozack said the IMF views medium-term inflation expectations as remaining well-anchored despite short-term price increases, and that global financial conditions remain accommodative
- At least 12 countries are expected to need US$20-50 billion (S$25-50 billion) in combined IMF and World Bank assistance, according to managing director Kristalina Georgieva's remarks at the April spring meetings, though Kozack declined to update those figures
- The Fund advised member countries in April to avoid broad fuel assistance subsidies that would drain scarce fiscal resources and stoke oil demand at a time of constrained supplies
- Kozack confirmed the IMF is in active policy discussions with countries seeking advice on how to respond to the energy shock, but did not name specific countries or confirm a Reuters report that Iraq has sought financial assistance
Why it matters: The IMF's adverse scenario marks a 0.6-percentage-point downgrade in global growth (2.5% vs 3.1%), driven entirely by sustained $100 oil and Middle East conflict rather than trade frictions. With at least 12 countries facing potential $20-50B in combined aid needs, the Fund is simultaneously pushing back against the broad fuel subsidies that those same governments will most likely demand first.
