Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, on Thursday urged the world economy to avoid recession despite rising trade tensions caused by fresh US tariffs.

Speaking in Washington ahead of the IMF and World Bank Spring Meetings, Georgieva warned that while global growth would suffer notable markdowns, a full recession was unlikely. She called on global leaders to act wisely and preserve economic openness.

Trade disruptions incur costs, she stated while addressing reporters. “This is a reminder that we live in a world of sudden and sweeping shifts. And it is a call to respond wisely.”

Her warnings come at a time of growing market volatility not seen since the Covid-19 pandemic, fuelled by US President Donald Trump’s unpredictable tariff announcements. Economists widely believe these measures will dampen global growth and stoke inflation in the short term.

The IMF is now expected to revise its global growth forecast, which was previously set at 3.3 per cent for 2025 and 2026 when it publishes its World Economic Report on Tuesday.

Georgieva outlined three key dangers facing the world economy as a result of rising tariffs.

“First, uncertainty is costly. When businesses do not know how much their inputs will cost in the future, it becomes harder to plan and invest,” Georgieva said.

“Second, rising trade barriers hit growth upfront. Tariffs, like all taxes, raise revenue at the expense of reducing and shifting activity.

“Third observation: protectionism erodes productivity over the long run, especially in smaller economies,” she said.

She stressed that emerging markets and smaller advanced economies, which depend heavily on trade, would feel the greatest strain.

Georgieva urged countries to put their own houses in order by tackling fiscal imbalances, gradually adjusting policies to lower debt where necessary, and ensuring their central banks remain independent and credible.

For China, she said the IMF recommends policies to boost chronically low private consumption and shift away from a state-supported, export-driven model of growth.

Turning to Europe, she advised the European Union to focus on improving competitiveness by deepening the single market.

Georgieva, who leads an organisation traditionally supportive of free trade and open markets, made a strong appeal for global cooperation.

“In trade policy, the goal must be to secure a settlement among the largest players that preserves openness and delivers a more level playing field,” she said.

“We need a more resilient world economy, not a drift to division, and to facilitate the transition, policies must allow private agents time to adjust and deliver,” she added.

The IMF boss warned that the alternative, which is a world increasingly divided by tariffs and protectionism, would only hurt long-term growth and leave the global economy more vulnerable to shocks.

“We are at a critical moment, the world must choose wisely,” she said.