Reference News Network, October 17 report: The UK's Financial Times website published an article titled "The World Economy in a Chaotic Era" on October 14. The author is the newspaper's chief economic commentator Martin Wolf. The translation is as follows:

How is the world economy? The answer is confusing. This is not surprising. In addition to some obvious macroeconomic uncertainties (such as worrying trends in fiscal deficits and debt in many important countries), we are witnessing two major changes: the United States abandoning its position as a global hegemon, and artificial intelligence, which may be the most important technological innovation in human history, is coming uncontrollably. No wonder we feel confused. However, it is surprising that the world economy has so far shown resilience in the face of these shocks and uncertainties.

This is a central theme in the opening speech by the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, at the autumn meeting and in the latest World Economic Outlook report. The main conclusion is that the IMF believes the slowdown in global growth this year and next will be relatively small. Of course, any such conclusion itself is highly uncertain. But it is consistent with what has happened so far this year, despite the chaotic situation.

Why has the world economy shown relative resilience? Georgieva (and the World Economic Outlook) gives four explanations: the consequences of tariffs are not as severe as expected; the adaptability of the private sector; favorable financial conditions; and improvements in the fundamentals of policy.

First, tariffs have ultimately been somewhat lower than initially announced by President Trump on April 2, 2025, "Liberation Day." Georgieva pointed out, "The U.S. trade-weighted tariff rate has fallen from 23% in April to 17.5% today." Moreover, retaliatory measures have been surprisingly low. However, these tariff levels remain high.

Second, the private sector has responded positively. Especially in the short term. Therefore, the World Economic Outlook notes, "Households and businesses have increased consumption and investment in anticipation of higher tariffs in the future." Additionally, delays in implementation have allowed companies to delay price adjustments. Moreover, exporters and importers have absorbed some of the price increases. However, the price transmission effect is occurring. Tariffs are a destructive tax: they will ultimately distort the structure and growth of global output.

Third, stock markets have remained prosperous, and the financial environment has generally been favorable. Part of the reason, especially in the United States, is the boom in artificial intelligence investments. Whether this is based on reality or like the bubbles that often accompany such innovations, remains to be seen.

The fourth factor seems particularly relevant to emerging economies. Many economies have learned lessons from past painful experiences, and thus have adopted more cautious fiscal and monetary policies than in the past. This is the subject of Chapter Two of the World Economic Outlook. The problem is that for many countries, external conditions are unlikely to improve.

In a moment when the world system is being upended, having confidence in the future is actually dangerous. As the IMF points out, there are many vulnerabilities today, especially those related to fiscal deficits and debt. For example, the institution states that it is expected that the U.S. government's general account balance will deteriorate by 0.5 percentage points of GDP by 2026, mainly due to "the passage of the Big and Beautiful Act," although it is expected that tariff revenues will offset about 0.7 percentage points of GDP. This also makes it less likely to significantly reduce global current account imbalances, while the IMF predicts a moderate reduction. This in turn may signal further intensification of global trade wars.

The meetings of the IMF and the World Bank are not only an opportunity to assess the overall state of the global economy and the significant risks of further trade disruptions, but also a particular focus on the situation of the poorest countries and people. The World Economic Outlook notes, "The poorest economies, including those plagued by long-term conflicts, are especially at risk of a slowdown in growth momentum." One reason is the reduction in aid and preferential loans. The sudden closure of the U.S. Agency for International Development could have a particularly significant impact on the health sector. A striking study published in the British medical journal The Lancet concludes that the dissolution of the agency "could lead to more than 14 million deaths by 2030."

The IMF and the World Bank were created in 1944 with the purpose of establishing principles of global economic cooperation. This need is clearly still present. It is encouraging that the United States has not yet exited the system.

The challenges ahead are huge, especially how to maintain economic growth during such a turbulent period of geopolitics. If the global economic system collapses, no country, no matter how powerful, can escape it. (Translated by Guo Jun)

Original: https://www.toutiao.com/article/7562172284639658506/

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