IMF's latest growth forecast: lowered China's growth forecast to 4.5%, raised Taiwan's growth forecast to 10.7%

The International Monetary Fund (IMF) released the latest "World Economic Outlook" report at the annual meetings of the IMF and the World Bank held in Bangkok on Tuesday (October 13).

The report predicts that the global economy will grow by 3.1% this year, 0.1 percentage points higher than the July forecast, but significantly lower than the 3.5% growth rate in 2025. Growth is expected to rebound to 3.4% in 2027.

The IMF believes global growth is slowing slightly less than previously expected as advanced economies show resilience after the war in Iran pushed up energy prices. However, many developed countries have benefited from growing investment in artificial intelligence (AI), while poorer countries that have not benefited from this boom face difficult choices in the face of high energy prices.

"The outlook is highly uneven," IMF chief economist Silvana Tenreyro told reporters in Bangkok. The report points out that growth is increasingly concentrated: 32 countries currently contribute 95% of global growth, compared with 54 countries in April this year.

The IMF predicts that global inflation will rise to 4.7% in 2026 and fall to 4.1% next year.

China: Domestic demand is weak, revised down to 4.5%

The IMF lowered China's growth forecast for this year to 4.5%, a slight further reduction from its July forecast. According to AFP, this figure is at the lower edge of Beijing's official growth target of 4.5% to 5.0% - the lowest in decades. In 2025, China's economic growth rate will be 5.0%.

The IMF predicts that China's economic growth will slow further to 4.0% in 2027, which is also 0.1 percentage points lower than the previous forecast.

Agence France-Presse analyzed that China's once-prosperous real estate industry has fallen into a multi-year crisis, frightening consumers and suppressing economic activity - even though exports and high-tech industries such as artificial intelligence and electric vehicles are booming.

The driving effect of the AI ​​boom on China cannot be ignored. The report said that the United States and China together account for more than three-quarters of global net import demand for computer chips and other AI-related equipment.

Germany: a substantial increase of 0.6 percentage points

The IMF has significantly raised its growth forecast for Germany. The IMF expects Germany's gross domestic product (GDP) to grow by 1.3% this year, 0.6 percentage points higher than its July forecast.

For 2027, the IMF expects the German economy to grow by 1.1%, an increase of 0.1 percentage points from the July forecast.

The IMF predicts that the 21 countries that use the euro will grow by 1.1% this year, 0.2 percentage points higher than previously expected; and will grow by 1.2% in 2027.

India: The fastest growth rate in the world, expected to be 7.0%

In Asia, India is once again predicted to be the world's fastest-growing major economy, with a growth rate of 7.0% this year, 0.6 percentage points higher than before, but lower than last year's 7.7% growth rate. The IMF attributes this to favorable demographics, a large and expanding domestic market, and ongoing structural reforms.

Taiwan: raised to a staggering 10.7%

Driven by the surge in global demand for AI chips, the IMF raised South Korea's growth forecast for this year to 3.3%, and Taiwan even raised it to a staggering 10.7%. However, the AI ​​industry landscape is highly concentrated, with Taiwan and South Korea alone accounting for 62% of the net trade in related computing components. Japan's growth forecast for this year is 0.7%, an increase of 0.1 percentage points, as fiscal measures introduced by Prime Minister Takaichi Sanae partially alleviate the impact of soaring fuel prices.

U.S. growth is expected to hold steady at 2.3% both this year and next. Developed economies as a whole are expected to grow by 2.1% this year and slow to 1.9% next year.

The outlook for regions more affected by energy shocks is bleak. Growth in emerging market and developing economies is expected to slow to 3.7% this year from 4.5% in 2025, before picking up to 4.4% next year. Economies in the Middle East and Central Asia are expected to shrink this year.

Risk warning: AI bubble, debt and inflation

The IMF warned that risks to global growth are tilted to the downside. "The world economy has shown resilience, but this resilience is under pressure," Treiro said, adding that this resilience "is approaching its limits" and the current task is to "shift from crisis response to reconstruction."

The report pointed out that the prolonged duration of the war and geopolitical tensions may reignite inflationary pressures, increase the burden on fiscal and external balance of payments, and hit energy importing countries and low-income countries the hardest. At the same time, if market expectations for AI-related profit and productivity gains are reassessed, the current technological tailwind could come to an abrupt end, leading to a decline in investment and tightening financial conditions.

Policy recommendations: Reduce deficit, raise interest rates to combat inflation

The IMF calls on countries to improve public finances and control rising debt. Trelo said this is particularly critical at a time when borrowing costs are high. She urged countries to start cutting budgets to reduce deficits and only take temporary and targeted fiscal measures to ease the burden of high energy prices on the public.

She also said that monetary policy should continue to firmly target price stability, suggesting that it is appropriate for the central bank to raise interest rates to curb inflation.