The International Monetary Fund ( IMF ) has downgraded its GDP forecasts for most of the world’s economies as they grapple with US President Donald Trump’s tariff turmoil. But it has maintained emerging and developing Asia as the engine of global economic growth.

According to the IMF’s latest World Economic Outlook released in Washington on April 22, the region’s economic growth is forecast at 4.5% for this year and 4.6% for 2026 – down from projections of 5.1% for both years in its January update.

The forecasts for Asia are around twice those for emerging and developing Europe ( 2.1% for both this year and next year ) and Latin America and the Caribbean ( 2.0% and 2.4% ).

Beyond Asia, sub-Saharan Africa is seen as the fastest-growing emerging and developing region ( 3.8% this year and 4.2% next year ), followed by the Middle East and Central Asia ( 3.0% and 3.5% ).

For the world economy overall, the IMF now projects growth of 2.8% this year – down from a 3.3% forecast in its January update.

For the 15 members of the Asia-Pacific region’s Regional Comprehensive Economic Partnership ( RCEP ) – the world’s biggest free-trade agreement – growth is being driven by China and a handful of Asean countries.

China’s growth forecast at 4.0%

The IMF now projects China’s growth this year at 4.0%, down from 4.6% in January. India ( not a member of RCEP ) is forecast to grow at a faster pace of 6.2%, down from 6.5%.

Among the advanced economy members of RCEP, growth is projected at 1.6% in Australia ( down from 2.1% in January ), 1.4 % in New Zealand ( no update in January ), 1.0% in South Korea ( down from 2.0% ) and 0.6% in Japan ( down from 1.1% ).

In Southeast Asia, the IMF sees the Philippines, Vietnam, Indonesia, Malaysia, and Cambodia as the fastest-growing economies.

Growth forecasts for this year are 5.5% for the Philippines ( down from 6.1% in January ), 5.2% for Vietnam ( no update in January ), 4.7% for Indonesia ( down from 5.1% ), 4.1% for Malaysia ( down from 4.7% ) and 4.0% for Cambodia ( no January update ).

Among the remaining Asean economies, the IMF expects slower growth of 2.5% for both Brunei and Laos, 2.0% for Singapore, and 1.9% for Myanmar ( none of which had updates in January ).

Thailand is Southeast Asia’s laggard, with growth projected at 1.8%, down from a 2.9% forecast in January.

At a news conference in Washington, IMF economic counsellor Pierre-Olivier Gourinchas said “many” emerging markets would be affected by the “enormous uncertainty, increased volatility” triggered by Trump’s tariff announcements since January.

Pause in investment, decline in demand

“Some of them may … benefit,” he said. "But overall, as a group, they are downgraded.

“While because they are also very plugged into the global supply chains, the uncertainty is leading to a pause in investment and activity, and they are going to suffer from the decline in demand for their products coming from the tariffs.”

Asked about the dollar's weakening in recent weeks, Gourinchas said “some of that is coming from the weaker growth prospects in the US. Some of it is coming from the increased uncertainty. And it's leading to a reassessment of the global demand for dollar assets.”

Weak dollar reducing competitiveness

“The flip side of this is, of course, the appreciation of some of these emerging markets' currencies means that they are also losing a little bit on the competitiveness side,” he said.

“So, there is maybe something that is a bit easier on the finance conditions, something that is not as easy on the trade side.”

Entering a new era

According to Gourinchas, “we are entering a new era as the global economic system that has operated for the last 80 years is being reset.

“Many tariff announcements have been made, culminating on April 2, with near universal levies from the United States and counter-responses from some trading partners,” he said, noting that the US effective tariff rate had “surged past levels reached more than 100 years ago”.

Beyond increased tariffs, “the surge in policy uncertainty is a major driver of the economic outlook”, the French economist said.

“If sustained, the increasing trade tensions and uncertainty will slow global growth significantly.”

‘Winners’ and ‘losers’?

In a commentary published to coincide with the IMF’s latest outlook, Gourinchas urges policymakers to “think well beyond the reductive lens of compensating transfers between ‘winners’ and ‘losers’, be it of technological revolutions or globalization.

“In this, unfortunately, not enough has been done, pushing many to embrace a zero-sum world view whereby the gains of some only come at the expense of others.

“Instead, it is important to better understand these root causes so that we can build an improved trading system that delivers more opportunities,” he says.

“Global integration is not an objective in and of itself. It is a means to an end, important insofar as it supports improved living standards for all.”

Photo: IMF economic counsellor Pierre-Olivier Gourinchas ( centre ) says the world is entering a new era.