By Mucahithan Avcioglu
ISTANBUL (AA) - The International Monetary Fund (IMF) lowered its global economic growth forecasts to 2.8% for this year and 3% for next year due to rapidly escalating trade tensions and increasing policy uncertainties, according to the World Economic Outlook report on Tuesday.
"The global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. Existing rules are challenged while new ones are yet to emerge," it said.
It stated that since January, a series of tariff announcements by the US, which started with Canada, China, Mexico and critical sectors, resulted in near-universal tariffs on April 2.
"The US effective tariff rate surged past levels reached during the Great Depression while counter-responses from major trading partners significantly pushed up the global rate," it noted.
The economic outlook is significantly influenced by the ensuing policy unpredictability and uncertainty and the sudden rise in tariffs and the resulting uncertainty will severely hamper global growth if it continues.
In the fund's forecasts published in January, the world economy was projected to grow by 3.3% this year and next year. The report noted that these growth rates were well below the historical average of 3.7%.
Growth in advanced economies is expected to be 1.4% this year and 1.5% next year, while growth in developing economies is projected to be 3.7% this year and 3.9% next year.
The report stated that global headline inflation is expected to decline at a slightly slower pace compared to expectations in January, to 4.3% in 2025 and 3.6% in 2026.
The intensifying downside risks dominate the global economic outlook and the escalation of the trade war and further increase in trade policy uncertainty could further reduce short and long-term growth.
Lowering existing tariff rates and reaching new agreements to provide clarity and stability in trade policies could support global growth, the report added.
The growth forecasts for the US economy were cut to 1.8% for 2025 from 2.7% and to 1.7% for 2026 from 2.1%.
The eurozone's growth estimates were also lowered, with 0.8% and 1.2% for this year and the next year, respectively. The UK's was also lowered to 1.1% for this year and 1.4% for 2026.
China's economic forecasts were also cut to 4% for both 2025 and 2026.
On the other hand, the IMF raised the growth forecast for Türkiye's economy to 2.7% for this year, while keeping the 2026 estimate at 3.2%.