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Daily Economic Update
23.04.2025Global: IMF slashes the 2025-26 global growth forecast, mostly for the US and China. The IMF, in its April 2025 World Economic Outlook (WEO), downgraded global economic growth forecasts for 2025 and 2026 on deteriorating prospects for global trade due to the imposition of trade tariffs. It warned that the risks to the global economy have increased and are firmly to the downside and that such major policy shifts are “resetting the global trade system and giving rise to uncertainty”. The outlook for this year was slashed by a sizeable 0.5% pts to 2.8% (from the previous forecast of 3.3%) and in 2026 by 0.3% pts to 3.0%. Among the major economies, the steepest downgrades were for the US and China: US growth in 2025 and 2026 was cut by 0.9% pts and 0.4% pts to 1.8% and 1.7%, respectively, while in China, growth was lowered by 0.6% pts and 0.5% pts to 4.0% for both 2025 and 2026. Growth in the Eurozone in 2025 and 2026 was lowered by 0.2% pts to 0.8% and 1.2%, respectively. UK GDP growth, meanwhile, was cut by 0.5% pts to 1.1% this year and by a limited 0.1% pts to 1.4% in 2026. Similarly, Japan’s growth was lowered by 0.5% pts to 0.6% in 2025 and by 0.2% pts to 0.6% in 2026. For the US, the inflation forecast for 2025 has been increased by 1% pt to reflect tariff-induced supply shocks and recent price dynamics for services and goods. The risk of a recession in the US has increased markedly to 37% currently, up from 25% at the time of the October 2024 WEO.
US: Trump denies plans to remove Powell, hopes for China deal to cut tariffs. President Trump backtracked on his previous remarks and comments from Economic Council Director Kevin Hasset that he was exploring means to prematurely sack Fed Chair Powell from the post, saying he didn’t intend to do so. Still, he continued to urge the Fed to cut interest rates. He also expressed hope that a deal with China could see tariffs come down significantly from the current 145% but not fully. Earlier, Treasury Secretary Bessent, in a private meeting, echoed similar sentiments, seeing current tariff structures on China as unsustainable but cautioning that discussions are yet to commence, and a comprehensive deal could take a while to materialize. There were also separate indications that trade deals with other nations, such as Japan and India, continued to progress, and some ‘high-level framework’ could be announced soon. A de-escalatory stance on trade tensions and diffusing worries of the US administration’s attempt to undermine Fed independence helped spur a rally in US equity markets. Following a 2.5% jump in the S&P 500 yesterday, boosted by Bessent’s dovish China comments, US equity futures point to another strong opening (over 1%).
Japan: Services sector PMI rebounds in April. The au Jibun Bank Japan Composite PMI showed signs of a modest recovery in April, climbing to 51.1 from 48.9 in March, when the reading was at its lowest since November 2022. This improvement was primarily driven by the services sector, which saw its PMI increase to 52.2 from 50.0, reflecting stronger customer demand and increased sales and which suggests a cautious return to economic growth amid trade tensions and inflation concerns. In contrast, the manufacturing sector continued to contract for the tenth consecutive month, with its PMI at 48.5 though a slight uptick on the 48.4 recorded in the previous month. The manufacturing downturn was largely attributed to concerns over US tariff policies, leading to the sharpest drop in new orders since February 2024 and the lowest business confidence among manufacturers since June 2020. Looking ahead, the IMF has forecasted Japan’s GDP growth at 0.6% for 2025, down from earlier projections. This downgrade reflects the adverse effects of US tariffs and the fragile state of Japan’s export-dependent recovery. The Bank of Japan is also expected to revise its growth forecast downward during its upcoming policy meeting, citing increasing risks posed by external headwinds. While the services sector’s resilience offers some optimism, the manufacturing sector’s continued contraction and global trade pressures may weigh on overall economic performance in the near term.
Oman: Inflation in March eases to 0.6% on food price declines. Inflation in Oman eased to 0.6% y/y (-0.4% m/m) in March from 1% in February. This is the slowest rate since November 2024 and mainly due to a drop in food and beverages prices along with softer price increases in the transportation category (to 1.7%y/y from 3.4% y/y in February).
GCC: IMF sees growth picking up this year, helped by energy sector. The IMF’s WEO also provided updated headline forecasts for the GCC region. Economic activity is expected to hold up well despite the slight downward revision to growth from previous estimates due to the deterioration in global trade. Output will be boosted in hydrocarbon exporters from the ramping up of crude oil production after the OPEC+ group commenced unwinding members’ voluntary cuts. The UAE and Saudi Arabia are expected to lead gains in the region in 2025, with growth of 4% and 3%, respectively, before giving way to Qatar in 2026 (5.6%) as the country brings on its expanded LNG production capacity.
