IMF Maintains Global GDP Growth Outlook Amid Trade and Geopolitical Risks

IMF

The International Monetary Fund (IMF) has kept its global GDP growth projections steady at 3.2% for both 2024 and 2025, according to its updated World Economic Outlook released today. While short-term growth remains stable, the report highlights significant long-term risks stemming from protectionist trade policies, supply chain disruptions, and geopolitical tensions.

Risks to Global Growth: Trade and Geopolitics

IMF Director of Research Pierre-Olivier Gourinchas cautioned that escalating regional conflicts, particularly in the Middle East, could disrupt commodity markets and amplify economic uncertainty. In addition, potential trade wars between the US, Europe, and China could have a severe impact.

For instance, the report includes a scenario where increased tariffs and trade policy disputes could lower the US GDP annual growth rate by 0.5 percentage points from 2025 to 2030, with ripple effects also felt in the eurozone and China. These challenges would exacerbate manufacturing slowdowns and heighten economic instability.

Regional Growth Highlights

United States: The IMF revised its US GDP growth forecast for 2023 upward to 2.8%, citing stronger-than-expected economic activity.

• China: China’s GDP growth forecast was slightly reduced to 4.8%, reflecting slower-than-anticipated recovery in some sectors.
• Global Impact: Medium-term growth is further constrained by high levels of sovereign debt, which limit public investment in critical areas like the energy transition.

Warning on Protectionism

The report also raised concerns about rising protectionist policies. Former US President Donald Trump has proposed tariffs of up to 20% on imports, with even higher rates for Chinese goods, should he return to office. Gourinchas warned that such policies could significantly lower global output and hinder economic recovery efforts.

Outlook for Economic Growth

While the baseline forecast offers stability for 2024-25, the IMF emphasized that long-term growth prospects are at risk due to policy uncertainty, high debt levels, and geopolitical tensions. Effective global cooperation will be key to mitigating these challenges and supporting sustained economic growth.