"IMF head says global economy faces enduring uncertainty"

Global Economic Uncertainty Warned as the "New Normal," IMF Chief Says

The head of the International Monetary Fund has issued a stark warning about increasing risks to the global economy, stating that uncertainty has become the new reality.

As financial leaders prepare to convene in Washington for the IMF’s annual meetings next week, Managing Director Kristalina Georgieva noted the global economy has displayed unexpected resilience despite heightened trade tensions.

The U.S. is now likely to avoid a recession, even with the imposition of significant tariffs on multiple trading partners, and global economic growth is projected to slow only marginally this year and next, she said.

However, Georgieva highlighted concerning indicators, including record-high gold prices—surpassing $4,000 an ounce this week—reflecting investor unease, as well as unusually high valuations in U.S. stocks.

"Before anyone grows too optimistic, understand this: global resilience has not yet been fully tested. And there are signs suggesting that test may be coming," she told attendees at the Milken Institute in Washington.

She warned that the full economic consequences of U.S. tariffs have yet to materialize, as many companies rushed exports earlier this year to avoid duties. "Prepare for ongoing uncertainty—it is now the new normal," she cautioned.

In its latest World Economic Outlook report in July, the IMF predicted global GDP growth of 3% this year, a slight decline from 3.3% in 2024. Updated forecasts will be released next week.

While financial markets have mostly remained stable despite policy disruptions, Georgieva noted this stability conceals underlying softness, adding, "History shows sentiment can shift suddenly."

U.S. stock prices have climbed to new highs in recent weeks, fueled by soaring valuations of major tech firms, such as chipmaker Nvidia and Tesla, the electric vehicle manufacturer led by Elon Musk.

Faith in potential productivity gains from artificial intelligence continues to bolster confidence on Wall Street, even as other sectors, including the U.S. labor market, show signs of slowing.

Comparing today’s market to the dotcom bubble era, Georgieva remarked, "Current valuations are nearing levels seen during the internet boom 25 years ago. A sharp downturn could tighten financial conditions, weaken global growth, and disproportionately affect developing nations."

The IMF is urging major economies to address global economic imbalances, including pressing the U.S. to reduce its growing public deficit. Recent tax cuts are projected to expand U.S. public debt by over $3 trillion in the next decade.

Georgieva also called on China to implement necessary economic reforms.