The IMF lowers growth projections for major economies due to increasing trade policy uncertainties and declining global demand.
The International Monetary Fund has revised down its growth forecasts for key economies including the US, Eurozone, Japan, and Thailand. The downgrade reflects heightened uncertainty from ongoing trade disputes and weakening consumer and business confidence worldwide.
Key takeaways
- The IMF has downgraded growth forecasts for major economies, including the US, Eurozone, Japan, and Thailand, due to rising trade policy uncertainty and weakening global demand.
- Despite recent US-China overtures, persistent tariff risks and deteriorating consumer and business sentiment are dragging on global economic momentum.
- Thailand’s export-driven recovery faces significant headwinds, with the IMF projecting the weakest GDP growth in ASEAN amid escalating global trade tensions.
Despite recent efforts by the United States and China to ease trade tensions, the global economy continues to lose momentum. The International Monetary Fund (IMF) has slashed growth projections for several key economies, including the US, Eurozone, Japan, and Thailand, citing persistent uncertainty surrounding global trade policies and escalating downside risks that threaten to undermine exports, consumer confidence, and investment.
United States: Economic Outlook Darkens Amid Trade Policy Turbulence
The IMF’s latest “reference forecast,” based on data through April 4, projects US GDP growth of just 1.8% in 2025 and 1.7% in 2026, sharply lower than earlier estimates of 2.7% and 2.1%, respectively. These projections were made prior to the US’s recent 90-day pause on reciprocal tariffs and reflect heightened uncertainty over the country’s protectionist trade stance and weakening domestic demand.
Economic indicators continue to deteriorate: consumer confidence has declined for four consecutive months to its lowest since July 2022, the unemployment rate has edged up, wage growth has slowed, and both the services and manufacturing PMIs signal further cooling. While de-escalation of trade tensions could temper recession risks, analysts at Krungsri Research expect the Federal Reserve to begin cutting interest rates by mid-year, potentially bringing the federal funds rate to 3.50 — 3.75% by year-end, to support growth and ease financial conditions.
Eurozone and Japan: Central Banks Eye Rate Cuts Amid Mounting Headwinds
Growth prospects have similarly dimmed in the Eurozone and Japan. The IMF now expects Eurozone GDP to grow by just 0.8% in 2025 and 1.2% in 2026, down from previous forecasts of 1.0% and 1.4%. Japan’s growth is projected at 0.6% in both years, compared to earlier expectations of 1.1% and 0.8%.
Consumer confidence across the Eurozone has plunged to its lowest level since November 2023, while business sentiment, as measured by the ZEW index, has weakened significantly. The services PMI has returned to contraction territory, compounding existing struggles in the manufacturing sector.
In Japan, inflationary pressures are mounting. Tokyo’s consumer price index recorded its fastest rise in two years, raising concerns that elevated prices could dampen household spending and corporate investment. Krungsri Research expects the European Central Bank to gradually lower its policy rate to 1.75% by end-2025. The Bank of Japan is likely to maintain its benchmark rate at 0.50% through the first half of the year.
China: Slow Recovery Undermined by Prolonged Trade Disputes
While the US and China have signaled a willingness to ease trade hostilities, negotiations remain fragile. The IMF downgraded China’s growth forecast to 4.0% in 2025, down from 4.6%, reflecting the prolonged uncertainty surrounding tariff negotiations. Despite reports of renewed dialogue, Chinese officials have denied any formal agreements and vowed retaliation against deals that threaten Beijing’s interests.
China is reportedly considering lifting certain high tariffs on US imports, including chemicals, but a comprehensive rollback of trade barriers remains elusive. Even with partial tariff reductions, estimated at 60%, China’s GDP and export growth could decline by 0.63% and 5.71%, respectively, according to scenario analyses.
Thailand: Strong Q1 Exports May Be Temporary as Risks Loom
Thailand posted a record-high export value of USD 29.5 billion in March, reflecting a 17.8% year-on-year increase and marking the fastest growth pace in three years.
The surge was primarily driven by strong demand for electronics and machinery, particularly from the US and China. However, economists caution that the export boom may be temporary, attributing it in part to front-loading of shipments ahead of potential tariff escalations between major trading partners.
Despite a recent 90-day pause on reciprocal tariffs announced by the United States, trade tensions remain elevated. Washington continues to enforce a base tariff of 10% on imports from many countries, alongside a steep 145% tariff on Chinese goods. In retaliation, Beijing has imposed a 125% tariff on US imports.
These developments have heightened Thailand’s vulnerability to global trade disruptions, especially if ongoing negotiations break down or if competing economies such as Vietnam manage to secure more advantageous terms.
Reflecting these risks, the International Monetary Fund (IMF) has slashed its forecast for Thai GDP growth in 2025 to just 1.8%, down from 2.9% previously. This would mark the lowest growth rate among major ASEAN economies. Krungsri Research has outlined three possible scenarios for Thailand’s economy: in the best-case scenario, where the US maintains only the 10% base tariff, GDP could expand between 2.2% and 2.4%. In a mid-range scenario involving 36% reciprocal tariffs lasting three to six months, growth could fall to 1.9%–2.1%. In the worst case, where tariffs persist beyond six months or rivals secure preferential access, Thailand’s GDP growth may slow to just 1.5% — 1.8%.
Across all scenarios, rising global uncertainty and volatile trade dynamics are expected to weigh on Thai exports, dampen investor sentiment, and create further headwinds for domestic economic activity.
Outlook: Risk of Global Recession Remains Elevated
Despite diplomatic efforts between the US and China, the broader global economic picture remains bleak. Structural headwinds, ranging from tight monetary policy and high inflation to supply chain disruptions and geopolitical instability, continue to weigh on growth prospects.
The IMF’s forecast revisions underscore the fragility of the post-pandemic recovery. Analysts warn that without decisive policy support and a durable resolution to trade disputes, the risk of a broader global recession remains significant. Investors, businesses, and policymakers must remain alert as the world economy enters an increasingly volatile and unpredictable phase.
