IMF cuts global growth forecasts while Lagarde urges policy flexibility. European households are growing increasingly anxious, raising new concerns over the resilience of the bloc’s fragile economic recovery as global trade tensions escalate. The European Commission’s latest flash estimate shows consumer confidence in the euro area dropped by 2.2 percentage points in April, falling to -16.7—its lowest level since late 2022.
This marked the second consecutive monthly decline, with the broader European Union also seeing a 2.1-point fall. The indicator now sits well below its long-term average, signalling deteriorating sentiment just as the region faces a slew of external shocks. The downturn in sentiment comes as a wave of global trade restrictions unsettles consumers and businesses alike.
Since February, the United States has imposed successive rounds of tariffs on key trade partners, culminating in a near-universal application of duties on April 2nd. The resulting market volatility triggered sharp declines in equity indices and surging bond yields. In its April World Economic Outlook, the International Monetary Fund cut its 2024 global growth forecast to 2.8%, down from 3.3%, citing elevated trade policy uncertainty and weakened productivity. The United States, bearing the brunt of the tariff fallout, is expected to grow by just 1.8% in 2025, down sharply from January’s 2.7% projection.
“For the United States, the tariffs represent a supply shock,” said IMF Chief Economist Pierre-Olivier Gourinchas. “That reduces productivity and output permanently and increases price pressures temporarily.” Economic growth in the eurozone is expected to remain subdued at 0.8% in 2025, 0.2 percentage points below January’s estimates. Growth is projected to modestly improve to 1.2% in 2026.
While each major eurozone economy witnessed a downward revision from earlier estimates, Spain is set to expand by 2.5% in 2025, an upward revision of 0.2 percentage points from January’s forecast. “We must remain flexible and data-dependent to the extreme,” said ECB President Christine Lagarde in an interview with CNBC on Tuesday. “Either we cut or pause, but our decisions will be shaped by incoming data.”
Source: Euronews Business
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