Charting the Global Economy: US Dollar Slide Evocative of Nixon

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South Korea’s preliminary April trade data gave an early glimpse of how US policies could dent shipments of export-reliant economies. It showed outbound shipments to the US and China were down 14.3% and 3.4%, respectively, while exports to the European Union and Taiwan were up.

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Europe

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Germany will probably fail to generate even minimal economic growth this year, according to revised government forecasts, a reminder of the scale of the challenge facing conservative Chancellor-in-waiting Friedrich Merz when he takes office next month. Gross domestic product will likely stagnate after shrinking the previous two years. Government economists previously expected expansion of 0.3% this year.

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European car sales returned to growth last month for the first time since December, with gains in the UK and robust demand for electric vehicles making up for weaker sales in Germany and France. Demand in Italy and Spain was also strong. 

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Emerging Markets

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Kenya’s economy is set to surpass Ethiopia’s to become East Africa’s largest this year, the International Monetary Fund said, after the birr was devalued. The fund estimates Kenya’s gross domestic product will be $132 billion in 2025, higher than Ethiopia’s $117 billion. 

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Brazil’s annual inflation accelerated to the highest level since mid-February 2023 in a report coming days after central bank directors assured investors that tight monetary policy is working.

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World

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The International Monetary Fund sharply lowered its forecasts for world growth this year and next, warning the outlook could deteriorate further as US President Donald Trump’s tariffs spark a global trade war. The IMF cut its projection for global output growth this year to 2.8%, which would be the slowest expansion of gross domestic product since 2020. It would also be the second-worst figure since 2009.

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California Governor Gavin Newsom boasted that his state has become the world’s fourth-largest economy, following only the US, China and Germany in global rankings. The state’s nominal gross domestic product reached $4.1 trillion last year, edging past Japan’s $4.02 trillion, Newsom said in a statement, citing newly released IMF country-level data and preliminary state data from the US Bureau of Economic Analysis. 

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Central banks in Indonesia, Paraguay, Russia and Uzbekistan all kept interest rates unchanged this week.

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—With assistance from Anya Andrianova, Soo-Hyang Choi, Alicia Clanton, Enda Curran, Wilfried Eckl-Dorna, Toru Fujioka, Erik Hertzberg, Kamil Kowalcze, George Lei, James Mayger, Dana Morgan, Andrew Rosati, Augusta Saraiva, Zoe Schneeweiss, Monique Vanek and Fran Wang.

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