Economy 'better than feared', IMF chief says

The world economy is "better than feared", slowing only slightly this year and next, while global trade appeared more resilient than expected, although it may still deteriorate as the full impact of higher US tariffs kicks in, major international organizations have said.

"How is the world economy coping? Short answer: better than feared, but worse than we need," IMF Managing Director Kristalina Georgieva said at a curtain-raiser event on Wednesday ahead of the annual meetings of the IMF and the World Bank next week in Washington.

In her speech, Georgieva seemed to frame next week's agenda around one unifying challenge: steering a global economy undergoing historic transformations — technological, demographic, geopolitical and environmental — through an era where uncertainty is "the new normal and it is here to stay".

"As our World Economic Outlook will explain next week, we see global growth slowing only slightly this year and next. All signs point to a world economy that has generally withstood acute strains from multiple shocks," she said.

Global growth is forecast at roughly 3 percent over the medium term — down from 3.7 percent pre-pandemic, Georgieva said.

That resilience is a result of improved policy fundamentals, private sector adaptability and supportive financial conditions, as well as less severe tariff outcomes than initially feared — for now, according to the IMF chief.

"The US trade-weighted tariff rate has fallen from 23 percent in April to 17.5 percent now — still much higher than before. The US effective rate is now far above the rest of the world's," she said.

The world has avoided a tit-for-tat slide into a trade war so far — but openness has nonetheless "taken a big hit", she added.

The IMF chief proposed three medium-term policy goals: to durably lift growth, repair governments' finances and address excessive imbalances, both domestic and external.

"Durably lifting growth requires higher private sector productivity," she said. "Governments must provide and protect the basic building blocks of free markets, including property rights, rule of law, good data, effective bankruptcy codes, strong financial sector oversight and independent yet accountable institutions."

Resilient trade

In another development, the World Trade Organization released its latest forecast, indicating that global trade has proven more resilient than anticipated so far this year, though the outlook for 2026 has worsened as the full impact of higher US tariffs becomes apparent.

Global merchandise trade exceeded expectations in the first half of 2025 due to increased spending on AI products, a surge in North American imports before tariff hikes, and strong international trade, the WTO said in an update of "Global Trade Outlook and Statistics" released on Tuesday.

As a result, economists at the Geneva-based organization raised the 2025 merchandise trade growth forecast to 2.4 percent, up from the previous 0.9 percent forecast in August.

But they noted that with higher tariffs, elevated policy uncertainty and cooling growth, momentum is expected to ebb in 2026 — the projection for next year's growth is lowered to just 0.5 percent from a previous estimate of 1.8 percent, according to the WTO report.

The organization also forecast slower growth in the trade of services, saying that global services export growth is now expected to slow to 4.6 percent in 2025 and to 4.4 percent next year. In 2024, the growth rate was 6.8 percent.

Regionally, Asia is expected to make the largest positive contribution to world trade growth in 2025, but that impulse fades next year as the global economy cools and the full-year effect of higher tariffs materializes.

Ngozi Okonjo-Iweala, the WTO's director-general, said trade resilience in 2025 is thanks "in no small part" to the stability provided by the rules-based multilateral trading system.

"Yet complacency is not an option. Today's disruptions to the global trade system are a call to action for nations to reimagine trade and together lay a stronger foundation that delivers greater prosperity for people everywhere," Okonjo-Iweala said.

huanxinzhao@chinadailyusa.com