00:00The International Monetary Fund has just released its updated growth outlook.
00:04Now it shows a slowing but surprisingly resilient world economy,
00:08weathering the impact of the Iran war, the energy crisis and trade tariffs.
00:14Global growth is forecast at 3% this year.
00:17Now that is down from the average of 3.5% for 2024 and 2025.
00:22But by 2027, global growth is expected to bounce back to around 3.4%.
00:28Global trade is expected to lose momentum with the IMF warning that markets are becoming less integrated
00:36and trade barriers are reshaping the way goods move around the world.
00:40Trade volume growth is expected to slow sharply from 5% in 2025 to just 3.5% this year.
00:48It is then expected to recover slightly to 4.3% in 2027.
00:52Now the report sees global inflation rising this year to 4.7%.
00:58That's due to the higher energy prices filtering through the economy.
01:02By 2027, it should ease to 3.9%.
01:05The International Monetary Fund says the biggest risk to growth, trade and inflation is Middle East volatility.
01:13Well, Denise Egan is lead author of the World Economic Outlook Update and she joins us now.
01:18And thank you so much for your time and for this report.
01:22We know now these renewed attacks between Iran and the USA.
01:26Donald Trump says the ceasefire deal is over.
01:29So can we still rely on the forecast in your outlook?
01:34Thank you for having me.
01:35So in our forecast, we have a baseline assumption on commodity prices and the price we're assuming for oil is
01:45actually $89 on average for 2026 per barrel.
01:50So given that we are now in the neighborhood of 80 or so, we actually have a quite conservative baseline
01:58and predicated on the assumption that the ceasefire would hold and normalization would start in middle of July, but would
02:08be only complete by March 2027.
02:143% global growth predicted.
02:16Do you think the world has actually weathered the shock of various crises quite well?
02:23We would think so.
02:26From the Middle East war, basically was expected to propagate into the global economy through higher commodity prices, through tighter
02:37financial conditions and possibly at the anchoring of inflation expectations.
02:41And we have not seen as high commodity prices as one would fear, given the closure of the Strait of
02:50Hormuz.
02:51And part of the reason for that is, of course, the release of strategic reserves and commercial inventories, which limited
02:59to the amount of adjustment that oil consumption and production need to do, given the muted increase in prices.
03:10And on inflation expectations, we have seen some movement in near-term inflation expectations, but medium-term expectations, broadly speaking,
03:21in many countries remained relatively well anchored.
03:24And last but not least, on financial conditions, we have seen some tightening in mid-April.
03:31But since then, actually, we have seen quite a bit of easing.
03:35So all those supported the activity that we have seen.
03:40For countries that seem to be weathering the storm quite well, I mean, if we look at the countries that
03:45have exceeded the growth baseline that you expect for this year, countries India, China, Nigeria among them,
03:52are there specific lessons that we can draw from those nations, particularly as we are still in uncertain times?
04:01Absolutely.
04:01So the two big forces shaping the outlook and recent developments, one is the shock itself, of course,
04:09but the other one is the upturn in the global technology cycle that we're seeing, very strong demand for AI
04:15-related hardware.
04:16And the examples that we can see is there are the first shock, the oil shock, and the war is
04:24affecting energy importers and exporters in different directions.
04:29So Nigeria, for example, is benefiting from favorable terms of trade effects.
04:34And on the other side, we do have energy importers possibly being affected negatively from the war shock.
04:43But if they are already plugged into the global technology supply chain well enough, they have that strong offset coming
04:54from the upturn in the technology cycle.
04:55An example of that is Korea, which is an energy importer and actually quite dependent on the middle production.
05:05But still, the strong, very strong demand for exports for semiconductors was able to offset the negative impact of the
05:15war.
05:15All right. Thank you so much for your time.
05:17Denise Egan, lead author of the World Economic Outlook.
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