International Monetary Fund (IMF) Lowers Global Growth Forecast
The International Monetary Fund (IMF) released its World Economic Outlook report on Tuesday (22), indicating that it has downgraded the global economic output (GDP) growth forecast for this year from 3.3% in January to 2.8%.
(Background: Nobel laureate Paul Krugman warns that Trump’s foolish policies could cause the U.S. to lose its global economic leadership.)
(Context: JPMorgan warns of ‘Trump tariff risks’: The probability of a global economic recession rises to 60%, and inflation in the U.S. may spiral out of control.)
According to a report by Bloomberg, in the World Economic Outlook report released by the IMF on Tuesday (22), the IMF has lowered the global GDP growth forecast for this year from 3.3% in January to 2.8%. If this forecast materializes, this year’s global GDP growth rate will mark the slowest growth since the COVID-19 pandemic in 2020, and will also be the second-worst performance in history. Furthermore, the IMF’s forecast for global economic growth in 2026 has been downgraded by 0.3 percentage points to 3%. The IMF emphasized that the global economy is facing significant downside risks, and the threat of a trade war is further deteriorating the global economic outlook.
Concerns About U.S.-China Economic Outlook
It is noteworthy that the United States and China have been the two economies with the largest downward adjustments in the IMF’s forecasts. The specific data is as follows:
United States: The economic growth forecast for 2025 is 1.8%, down 0.9 percentage points from previous estimates; for 2026, it is 1.7%, down 0.4 percentage points. At the same time, the inflation expectation for the U.S. in 2025 has been revised up by about 1 percentage point to 3%.
China: The economic growth rate is forecasted to be 4% for both this year and next, down 0.6 and 0.5 percentage points, respectively. The IMF explained that China’s expansionary policies can partially mitigate the impact of tariffs, but the overall economy still finds it difficult to completely resist the negative effects of the trade war.
Taiwan’s Economic Growth Expectation Revised Upward
However, it is worth noting that in this report, the IMF has revised Taiwan’s economic growth forecast upward, estimating that Taiwan’s economic growth rate will reach 2.9% this year, which is 0.2 percentage points higher than the 2.7% anticipated last October.
In this regard, the National Development Council commented that the IMF’s optimistic forecast for Taiwan far exceeds those for Singapore (2.0%), Hong Kong (1.5%), and South Korea (1.0%). The reasons summarized include three key advantages for Taiwan:
- Taiwan has a competitive edge in AI and semiconductors, occupying a place at the forefront of current technology.
- Taiwanese businesses are globally positioned, demonstrating strong adaptability and resilience in responding to the trade war.
- The government actively implements measures, proposing a short-term NT$88 billion export supply chain support.
However, we know that if Trump indeed announces a new round of tariffs on the semiconductor industry, the impact on Taiwan is expected to be severe. After all, the IMF publishes lagging data, and in a context of high uncertainty, investors should remain cautious.
Trade War as the Main Cause of Economic Slump
In response to this report, the IMF analyzed that the high tariff policies promoted by U.S. President Trump are the core factors leading to the deterioration of the global economic outlook. Firstly, for the U.S., the trade war will trigger supply shocks, driving up domestic prices and weakening productivity; for its trading partners, higher tariffs will bring demand shocks, severely impacting output and investment. IMF data shows that the actual tariff rate in the U.S. has soared to its highest level in nearly a century, further exacerbating global trade tensions.
In this regard, IMF Chief Economist Pierre-Olivier Gourinchas warned at a briefing: “We are entering a new era, and the global economic system that has operated for the past 80 years is being reset.” He stated that the possibility of an escalation of the trade war still exists in the short term, which may trigger a chain reaction in the global economy. The organization has downgraded this year’s global trade growth forecast by 1.5 percentage points and anticipates only a slight recovery next year.
At the same time, although the U.S. may have a chance to avoid falling into recession this year, the IMF has also raised the probability of a U.S. economic recession from 27% last October to 40%. Gourinchas emphasized: “The risks facing the global economy have significantly increased, and are clearly skewed to the downside.”
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