IMF now sees global growth more reliant on China and India

International Monetary Fund MD Kristalina Georgieva (Courtesy: Reuters photo)

The International Monetary Fund expects China and India — the world’s most populous countries — to play a bigger role driving the global economy, as it downgrades growth forecasts due to an escalating trade war.

The IMF cut its global projection for this year to 2.8% in the updated World Economic Outlook released Tuesday, down from the 3.3% it was expecting in January. The Fund’s team had to rapidly revise country forecasts due to high levels of uncertainty, after US President Donald Trump announced sweeping worldwide tariffs and then dialed some of them back, at least temporarily.

Compared to the forecasts it made in October, the IMF now expects a bigger share of growth to come from China and India, according to projections published this week based on purchasing power parity. Meanwhile, the expected contribution from the US was revised downward.

China will be the top contributor to global growth over the next five years, with a 23% share — up from 21.7% six months ago — according to Bloomberg calculations based on the IMF numbers published Tuesday. India is now expected to add more than 15% of additional output through 2030, while the US share drops to 11.3% from a prior estimate of 11.6%.

Global growth will remain concentrated, the IMF forecasts suggest, with some 80% of it coming from the top 25 countries.

Despite the lower projected US contribution, it’s still forecast to chip in a bigger share than the European Union — and the IMF sees that gap widening slightly on an annual basis in the coming years.