World Economic Organization boosts growth projection, attributing resilience to Trump's trade barriers
The International Monetary Fund (IMF) has recently revised its global economic growth forecast for 2025 and 2026, with projections now standing at 3.0% and 3.1% respectively. This upward revision from the previous April 2025 estimates of 2.8% and 3.0% respectively, reflects a series of positive factors that have contributed to an improvement in the global economic outlook.
According to the IMF, the improvement is primarily due to front-loading of economic activities ahead of tariff implementations, lower actual tariff rates than expected, improved financial market conditions, and some fiscal expansions in major economies. Additionally, the IMF notes a positive adjustment in trade growth forecasts, and sees improvements despite ongoing uncertainties like geopolitical tensions and inflation concerns.
One of the key factors behind this improvement is the less-than-anticipated damage from US President Donald Trump's tariff regime. The US deadline for tariff reprieves for several countries is approaching this Friday, raising concerns about potential trade shocks. However, the actual tariff rates have been lower than expected, easing trade tensions.
The IMF's chief economist, Pierre-Olivier Gourinchas, sees a "tenuous resilience" in the world economy. He emphasizes that the environment remains precarious due to trade shocks, with the world economy still being vulnerable to such uncertainties.
Other positive factors contributing to the revised forecast include rallying financial markets and a depreciation of the U.S. dollar, suggesting investor confidence. Some fiscal stimulus measures in major countries have also played a role in boosting economic growth. Trade volume growth has been better than expected, with the IMF revising its forecast from 1.7% to 2.6% in 2025.
However, the IMF also highlights persistent downside risks, including uncertainties surrounding US fiscal policy, tariffs, geopolitical conflicts, and above-target inflation in the U.S. These factors combined have encouraged a modest upward revision to global growth projections.
Meanwhile, geopolitical tensions continue to dominate headlines, with the Gaza war potentially ending with an all-or-nothing plan floated by both the US and Israel. The New York Times is under a microscope as the Gaza narrative shifts against Israel.
In other news, Beijing is preparing national security countermeasures in response to the US's hawkish AI stance. The environment remains precarious, with investors like Jacqueline Novogratz calling for more 'moral imagination' in the investment world.
As the global economy continues to navigate through these challenging times, the IMF's revised forecast provides a glimmer of hope for a brighter future. However, it also serves as a reminder that the world economy remains vulnerable to trade shocks and other uncertainties.
The revised forecast by the IMF indicates a positive adjustment in trade growth, which, alongside lower tariff rates, has contributed to a better-than-expected trade volume growth in 2025. In the context of business and finance, this improvement demonstrates the resilience of global economies amid ongoing uncertainties. Despite the rallying financial markets and fiscal stimulus measures in key economies, the IMF's chief economist, Pierre-Olivier Gourinchas, underscores the precariousness of the environment due to trade shocks and geopolitical tensions.
