Why is the discussion?
World Economic Outlook, 2023 has been released by the International Monetary Fund (IMF). Whose title is ‘Navigating Global Divergence’. According to this, the Indian economy will grow more rapidly than previously estimated.
Table of Contents
Key Features of the World Economic Outlook:
Global Growth Forecast:
- The IMF estimates global GDP growth of 3% in 2023, which is the same as its forecast global GDP for July 2023.
- However, global GDP growth for 2024 has declined by 10 basis points from the July forecast to 2.9%.
Chinese Economy Forecast:
- The Chinese economy is expected to grow by 5% in 2023, up from its 3% growth in 2022.
- The IMF’s October forecast for China’s growth in 2023 and 2024 is 20 and 30 basis points lower than its July forecast, indicating that the world’s second-largest economy will face difficulty maintaining its position. May fall.
Inflation and Monetary Policy:
- The IMF estimates that global inflation will grow at a rate of 5.8% in 2024, which is faster than the projected three-month rate of 5.2% growth, and these projections do not take into account the events of the weekend and their consequences.
Concerns and Risks:
- Growth has lagged due to tight monetary policies implemented by central banks to tackle inflation, which is set to reach 8.7% by 2022, and an uneven recovery as a result of Russia’s invasion of Ukraine, the pandemic, and supply chain disruptions.
Uncertainties and Downside Risks:
- Investment remains below pre-pandemic levels, hit by higher interest rates and tighter credit conditions.
- The IMF advises countries to rebuild fiscal buffers to protect against future risks.
- The probability of global growth falling below 2% is about 15%, with a higher risk of falling than reaching highs for the year 2024.
Findings related to India:
- India’s GDP for session 2023-24 will be 6.3%, which is an increase of 20 basis points from July 2023.
- The IMF’s growth forecast for India for session 2023-24 is now almost the same as what the World Bank (WB) had estimated in its India Development Update.
- India’s GDP growth forecast for session 2024-25 remains unchanged at 6.3%.
- Despite strong growth of 7.8% in the quarter ending June 2023, IMF has projected India’s GDP growth for session 2023-24 to rise, with the annual growth figure still below the RBI Monetary Policy Committee’s target of 6.5% which is lower than expected.
Key Recommendations:
- There is a need to encourage business investment to promote economic growth, as seen in the US, where strong business investment has contributed to improved growth forecasts.
- Economic divergence in major economies, especially in the Eurozone, should be closely monitored and attention needs to be paid to the factors causing contraction or slower growth in some regions.
- To exercise caution in managing inflation and monetary policy. The IMF stressed that tightening with synchronized central banks globally is necessary to control inflation and maintain economic stability.
International Monetary Fund (IMF):
- The IMF is an international organization that promotes global economic growth and financial stability, encourages international trade, and helps reduce poverty.
- It was established in the year 1945 with the Bretton Woods Conference.
- The primary purpose of the IMF is to ensure the stability of the international monetary system, the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.
- Ultimately it became the lender of last resort to governments of countries that faced severe currency crises.
Report by IMF:
- Global Financial Stability Report.
- World Economic Outlook
- It is published twice a year generally in the months of April and October.
- You can refer latest World Economic Outlook (October 2023) on the given link.
- Visit our Home page for the latest updates.
