The International Monetary Fund (IMF) has raised its global growth outlook for this year due to the resilience of the economy, especially in the service sector during the first quarter of 2023. However, the IMF also warns of persistent challenges that could dampen the medium-term outlook. Meanwhile, India’s economic growth projection for this year is set at 6.1 per cent.
According to the latest World Economic Outlook (WEO) by the IMF, global real GDP growth for this year is projected to be 3.0 per cent, which is 0.2 percentage points higher than the April forecast. However, the forecast for 2024 remains unchanged at 3.0 per cent, reflecting weak growth among advanced economies worldwide.
The slight increase in the growth forecast is attributed to easing inflation and reduced stress in the banking sector. IMF Chief Economist Pierre-Olivier Gourinchas mentioned that growth remains on the low side and the outlook for the next five years indicates a significant slowdown compared to pre-COVID levels.
The global economic growth is nearly half of what it was two years ago (6.3 per cent) and lower than the 3.5 per cent in 2022. Gourinchas points out that this reduced growth is related to the aging global population, especially in countries like China, Japan, and Germany.
The IMF expects global headline inflation to fall to 6.8 per cent this year from 8.7 per cent in 2022 and further drop to 5.2 per cent next year. Core inflation is predicted to decline more gradually, from 6.5 per cent in 2022 to 6.0 per cent in 2023 and 4.7 per cent in 2024.
The IMF cautions that if the conflict in Ukraine intensifies and extreme weather events increase due to the El Nino weather pattern, commodity prices could rise, leading to further rate hikes.
In terms of emerging markets and developing economies (EMDEs), a growth rate of 4.0 per cent is expected in 2023 and 4.1 per cent in 2024, with the overall outlook being “broadly stable.” The report highlights that much of the global growth this year will be driven by EMDEs like India and China, with advanced economies experiencing significantly slower economic activity.
China’s growth forecast for this year remains unchanged at 5.2 per cent, while advanced economies are expected to grow by 1.5 per cent in 2023, up by 0.2 percentage points from April, and 1.4 percent in 2024.
India’s growth projection for this year has been increased to 6.1 per cent, up by 0.2 percentage points from the previous forecast in April. The report attributes this growth to the momentum from stronger-than-expected growth in the fourth quarter of 2022, driven by robust domestic investment.
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