The International Monetary Fund (IMF) has issued a stern warning regarding trade tensions and potential downturns in the artificial intelligence (AI) sector as significant risks to global economic growth. In its updated world economic outlook, the IMF describes the current state of the global economy as steady, with a growth forecast of 3.3% for this year, which is an increase from a previous estimate of 3.1%.
The concerns arise following threats from Donald Trump to impose tariffs on several European nations opposing his Greenland acquisition proposal. The IMF has underscored the importance of maintaining central bank independence for fostering global economic stability and growth.
According to the IMF's chief economist, Pierre Olivier Gourinchas, while the global economy is currently resilient, any abrupt shifts in AI growth expectations could trigger significant market corrections. Even a mild market correction could have cascading effects due to the accumulated wealth from stock price gains in recent years, he stated. Furthermore, companies increasing their debt for AI investments add another layer of vulnerability to the economic system.
Trade tensions are identified as a major uncertainty that could exacerbate economic challenges, leading to fluctuations in financial markets, supply chains, and commodity prices. Gourinchas remarked, Domestic political or geopolitical tensions could spark new uncertainties that disrupt global economic dynamics.\
The IMF also shared insights on the UK's growth prospects, anticipating modest growth and improvements in inflation rates while highlighting the overall significance of sound macroeconomic policies to navigate potential risks effectively. With inflation expected to decrease and return to the target level, the outlook suggests cautious optimism amid global economic challenges.
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