The IMF has further downgraded its outlook for the world economy, predicting that growth this year would be the weakest since the 2008 financial crisis, primarily because of widening global conflicts.
The IMF’s latest World Economic Outlook, released on Tuesday, foresees a slight rebound next year, but warns of threats ranging from heightened political tensions in the Middle East to the threat that the US and China will fail to prevent their trade dispute from escalating.
The new forecast predicts global growth of 3 percent this year, down 0.2 percentage points from the IMF’s previous forecast in July and sharply below the 3.6 percent growth of last year.
It would be the weakest year since global growth was minus-0.1 percent in 2009 as the global economy struggled with the shockwaves from the 2008 financial crisis.
For the US this year, the IMF projected a modest 2.4 percent gain, down from 2.9 percent last year.
Next year, it foresees a rebound for the world economy to 3.4 percent growth, but a further slowdown in the US to 2.1 percent, far below the 3 percent growth that the US President Donald Trump’s administration has projected.
IMF economists said that even its projected modest gains might not be realized.
“With a synchronized slowdown and uncertain recovery, there is no room for policy mistakes, and an urgent need for policymakers to cooperatively de-escalate trade and geopolitical tensions,” IMF chief economist Gita Gopinath said.
The IMF’s forecast predicted that about half the increase in growth expected next year would result from recoveries in countries where economies slowed significantly this year, as in Mexico, India, Russia and Saudi Arabia.
The global economy would also get a boost from recoveries or at least more shallow recessions in various stressed emerging-market economies such as Turkey, Argentina and Iran.
The report said that the expected rebound would represent a modest bounceback after steep economic declines this year.
One worrisome development is that the slowdown this year has occurred even as the US Federal Reserve and other central banks have been cutting interest rates and deploying other means to bolster economies, IMF economists said.
The IMF estimated that global growth would have been about one-half percentage point lower this year and next year without the central banks’ efforts to ease borrowing rates.
“With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot,” Gopinath said.
In addition to trade and geopolitical risks, the IMF envisions threats arising from a potentially disruptive exit by the UK from the EU on Oct. 31.
The IMF urged policymakers to intensify their efforts to avoid economically damaging mistakes.
“As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list,” Gopinath said. “Such actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and manufacturing and raise world growth.”
The IMF projected that growth in the 19-nation eurozone would slow to 1.2 percent this year, after a 1.9 percent gain last year.
It expected the pace to recover only slightly to 1.4 percent next year.
Growth in Germany, Europe’s biggest economy, is expected to be a modest 0.5 percent this year before rising to 1.2 percent next year.
China’s growth is projected to dip to 6.1 percent this year and 5.8 percent next year.
These would be the slowest rates since 1990, when China was hit by sanctions after the brutal crackdown on pro-democracy demonstrators in Beijing’s Tiananmen Square.
For Japan, the IMF expected growth of just 0.5 percent next year. It forecast an expansion in Russia of 1.9 percent, up from 1.1 percent this year.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to