IMF lowers global growth forecast

Global GDP may grow by just 2.8% this year - the lowest since the pandemic while the two largest economies , the US and China, also have their growth forecasts downgraded.

On April 22, the International Monetary Fund (IMF) released an updated Economic Outlook Report. In it, the organization lowered its forecast for global economic growth this year from 3.3% to 2.8% - the lowest since the beginning of the pandemic. The reason is policy instability and escalating trade tensions globally. Last year, world GDP increased by 3.3%.

The world's two largest economies have both seen their growth forecasts lowered this year. The US GDP is now forecast to grow by just 1.8%, down from 2.8% last year. Inflation has also been revised up significantly due to rising import costs.

As for China, the IMF has cut its growth forecast for the country to 4% for both this year and next, up from 4.6% in its January report. Chinese officials have set a growth target of around 5% this year.

People shop in a shopping mall in Pennsylvania (USA). Photo: Reuters

Since taking office, US President Donald Trump has imposed a 145% import tax on all Chinese goods. Some products are even subject to a 245% tax. In response, China has imposed a 125% tax on US goods, causing trade relations between the world's two largest economies to almost freeze. US Treasury Secretary Scott Bessent said this situation "cannot be sustained".

Growth in the eurozone is also forecast to be lower than last year. Germany's GDP may be flat, while France and Italy's GDP are estimated to grow below 1%. Japan, the world's fourth-largest economy, may grow just 0.6% this year, down from the 1.1% estimate in the IMF's January report.

The IMF is concerned that the import tariffs announced by the US and many other countries "are a major shock to growth". In addition, policy uncertainty also affects economic activity and prospects, making it difficult for them to make consistent and timely forecasts.

Earlier this month, the US President announced import tariffs on all trading partners. The base rate is 10%, which applies to most economies. The higher reciprocal tariffs, which apply to dozens of economies, are now on hold for 90 days to give countries a chance to negotiate lower rates.

There are some positive signs. White House press secretary Karoline Leavitt said on April 22 that negotiations were moving quickly. Eighteen countries had made proposals, and President Donald Trump's trade team was scheduled to meet with 34 countries this week to discuss tariffs. Trump also expressed optimism that a trade deal with China could "significantly reduce" its import tariffs.

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