The economist spoke to AFP at the IMF’s headquarters in Washington, ahead of the publication of its key World Economic Outlook (WEO) report on Friday.
In the WEO update, which did not incorporate Trump’s proposals due to policy “uncertainty,” the IMF raised its forecast for global growth and significantly upgraded its outlook for the US economy.
While many economists see Trump’s tariff and immigration plans as inflationary, Trump and his advisors argue that the overall policy package he intends to implement will help stabilise prices.
Traders have scaled back their expectations for rate cuts by the US Federal Reserve in 2025, with data from CME Group indicating an 80 per cent probability that no more than two quarter-point rate cuts will occur this year.
Gourinchas said the IMF anticipates the Fed will lower rates by half a percentage point in both 2025 and 2026, a projection aligned with the median forecast from Fed officials surveyed in December.
Deflation risk in China
In contrast, the outlook for the world’s second-largest economy presents a starkly different picture. China is grappling with a property sector crisis and growing uncertainty regarding global trade policies.
In its WEO report, the IMF projects China’s growth will continue to slow, though the decline may be mitigated by recent fiscal support measures introduced by the government.
“If you look at China, the concern is the potential for entering a deflationary regime, exacerbated by the worsening property sector crisis,” Gourinchas explained.
“In terms of policies, we believe the Chinese authorities are moving in the right direction, but there is room to do more,” he added.
Failure to take additional action could result in the economic support falling short, potentially leading to a more significant slowdown in growth, Gourinchas warned.
Data released by Beijing on Friday revealed that China’s growth reached 5 per cent last year, slightly surpassing expectations but below the 5.2 per cent growth recorded in 2023.
AFP
