‘India remains a bright spot’: IMF says global growth to fall 2.9 per cent in 2023
Washington: The International Monetary Fund (IMF) on Tuesday said it is expecting some slowdown in the Indian economy next fiscal year and projected the growth to 6.1 per cent from 6.8 per cent during the current fiscal ending 31 March.
The IMF on Tuesday released the January update of its World Economic Outlook, according to which the global growth is projected to fall from an estimated 3.4 per cent in 2022 to 2.9 per cent in 2023, then rise to 3.1 per cent in 2024.
“Our growth projections actually for India are unchanged from our October Outlook. We have 6.8 per cent growth for this current fiscal year, which runs until March, and then we’re expecting some slowdown to 6.1 per cent in fiscal year 2023. And that is largely driven by external factors,” Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF told reporters here.
“Growth in India is set to decline from 6.8 per cent in 2022 to 6.1 per cent in 2023 before picking up to 6.8 per cent in 2024, with resilient domestic demand despite external headwinds,” said the IMF’s World Economic Outlook update.
According to the report, growth in emerging and developing Asia is expected to rise in 2023 and 2024 to 5.3 per cent and 5.2 per cent, respectively, after the deeper-than-expected slowdown in 2022 to 4.3 per cent attributable to China’s economy.
China’s real GDP slowdown in the fourth quarter of 2022 implies a 0.2 percentage point downgrade for 2022 growth to 3.0 per cent — the first time in more than 40 years with China’s growth below the global average. Growth in China is projected to rise to 5.2 per cent in 2023, reflecting rapidly improving mobility, and to fall to 4.5 per cent in 2024 before settling at below 4 per cent over the medium term amid declining business dynamism and slow progress on structural reforms.
“Overall, I want to point out that emerging market economies on the whole and developing economies seem to be already on their way up. We have a slight increase in growth for the region from 3.9 per cent in 2022 to 4 per cent in 2023,” Gourinchas said.
“Another relevant point here is that if we look at both China and India together, they account for about 50 per cent of world growth in 2023. So a very significant contribution,” he said.
“I want to say, we had a positive view on India in our October forecast. That positive view is largely unchanged,” Gourinchas said in response to a question.
In a blog post, he wrote that India remains a bright spot. Together with China, it will account for half of the global growth this year, versus just a 10th for the US and euro area combined, he added.
For advanced economies, the slowdown will be more pronounced, with a decline from 2.7 per cent last year to 1.2 per cent and 1.4 per cent this year and next. Nine out of 10 advanced economies will likely decelerate, Gourinchas said.
The US growth will slow to 1.4 per cent in 2023 as Federal Reserve interest-rate hikes work their way through the economy. Euro area conditions are more challenging despite signs of resilience to the energy crisis, a mild winter, and generous fiscal support, he said.
“With the European Central Bank tightening monetary policy, and a negative terms-of-trade shock — due to the increase in the price of its imported energy — we expect growth to bottom out at 0.7 per cent this year,” Gourinchas wrote.
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