IMF cuts growth forecasts as tariffs hit global economy

IMF forecasts lower global growth this year: The International Monetary Fund (IMF) forecasts global growth to log 2.8% in 2025, down 0.5 percentage point from previous estimates, it said in its World Economic Outlook report (pdf). Growth is expected to edge up to 3.0% in 2026, though this remains below the IMF’s earlier projections at 3.3%.

We all know the culprit: The revision is a direct consequence of “new trade measures and their indirect effects through trade linkage spillovers, heightened uncertainty, and deteriorating sentiment.”

Major economies projected to take a hit: The US is now expected to grow 1.8% in 2025, down nearly one percentage point from the previous forecast, as “greater policy uncertainty, trade tensions, and a softer demand outlook” weigh down on consumption. Meanwhile, Japan’s growth was cut by 0.5 points to 0.6%, with tariff concerns expected to offset gains in private consumption and disposable income. The Fund also downgraded its forecast for Canada’s growth by 0.6 percentage points, and for the UK by half a point.

China and India will bear the brunt too: China’s 2025 outlook was cut by 0.6 points to 4.0%, as trade restrictions “offset the stronger carryover from 2024 and fiscal expansion in the budget.” The following year comes with a similar downward revision and growth forecast. Meanwhile, India’s growth was trimmed by 0.3 percentage points to 6.2%.

Across the Atlantic: Growth in the Eurozone is expected to decline “slightly” to 0.8% this year. Still, the IMF projects a stronger growth of 1.2% next year, driven by stronger consumption and rising wages as “debt brake” reforms in Germany spur growth.

Spain is a rare bright spot in the Fund’s updated forecasts, with an upward revision of 0.2 percentage points, leaving 2025 growth forecast at 2.5%. This reflects “a large carryover from better-than-expected outturns in 2024 and reconstruction activity following floods,” the IMF said.

Tariff clouds may turn into showers: Recent waves of US tariffs and the resulting retaliatory measures by China, Canada, and the EU have created “unprecedented” policy uncertainty. This is dragging down global trade volumes, which are now expected to grow just 1.7% in 2025 — a full 1.5 percentage points lower than previous expectations.

A new era: “The increased uncertainty and tightening of financial conditions could well dominate the short term, weighing on economic activity, as reflected in the sharp decline in oil prices,” IMF chief economist Pierre-Olivier Gourinchas said in a blog post. Growth prospects could see immediate improvement, however, if countries managed to move past differences and forge new trade agreements, Gourinchas added.

The inflation outlook Global inflation is expected to decline the next two years, hovering at around 4.3% in 2025 (revised slightly upwards) and at 3.6% in 2026.

MARKETS THIS MORNING-

Asian markets are in the green this morning, after comments from the Donald sparked hopes for tariff de-escalation. Hong Kong’s Hang Seng is leading gains with a 1.8% increase, followed by Japan’s Nikkei at 1.7%. Wall Street futures are also inching up following strong gains yesterday, after Trump denied plans to remove the Fed chief.

THE CLOSING BELL-

The ADX fell 0.2% yesterday on turnover of AED 1.1 bn. The index is down 1.7% YTD.

In the green: Aram Group (+5.9%), Multiply Group (+4.1%) and Invictus Investment Company (+3.7%).

In the red: National Bank of Umm Al Qaiwain (-4.4%), Gulf Medical Projects (-3.5%), and Presight (-3.2%).

Over on the DFM, the index rose 0.6% on turnover of AED 434.5 mn. Meanwhile, Nasdaq Dubai was up 0.2%.

CORPORATE ACTIONS-

The board of Abu Dhabi-based Union Ins. has approved an AED 101 mn capital reduction, cancelling shares to bring its capital to AED 230 mn to offset the firm’s accumulated losses, according to an ADX disclosure (pdf).The company also released funds from its legal and special reserves to help write off accumulated losses.

Emirates Ins. has approved a dividend distribution of AED 75 mn for FY 2024, equivalent to 50 fils per share, according to an ADX disclosure (pdf). The dividends represent 50% of the company’s paid up capital.

BHM Capital approved a dividend distribution equal to 15.3% of its current paid-up capital via the issuance of 26.6 mn bonus shares, increasing its capital to AED 200 mn from AED 173.4 mn, according to a DFM disclosure (pdf).

Agthia Group will distribute AED 89.1 mn in dividends for 2024, representing 10.7% of the company’s share capital, according to an ADX disclosure (pdf).

Union Properties approved a 33.4% capital reduction to AED 2.9 bn to offset accumulated losses, according to a DFM disclosure (pdf). The reduction will be executed by lowering the nominal value of each share to AED 0.7.