IMF World Economic Outlook- Update

The International Monetary Fund (IMF) released its World Economic Outlook on January 25, 2022.

Key Findings of the report

• As per report, Global economic growth will decrease by half a percentage point less than it was forecasted earlier.
• The growth will decrease from 5.9% in 2021 to 4.4% in 2022. It will further reduce to 3.8% in 2023.

India’s growth

• According to IMF forecast, India will grow at 9% in 2021-2022. In October 2021 estimate, IMF had estimated India’s growth prospects at 9.5% for the year. IMF now projects 9% growth for India’s economy in 2022-23. In October assessment, growth was forecasted at 8.5% in 2022-23 and 7.1% in 2023-24.
• India’s prospects for 2023 is estimated based on expected improvements to credit growth. Furthermore, investment and consumption are building on better performance of the financial sector.

Impact of Omicron variant

As per IMF, amid emergence of Omicron Covid-19 variant, countries have reimposed mobility restrictions. Increasing energy prices and supply disruptions have resulted in higher and more broad-based inflation than it was expected, in United States and other developing economies & emerging market. Ongoing retrenchment of real estate sector in China and slower recovery of private consumption have also limited growth prospects.

World Bank on global growth

Recently, the World Bank also had predicted a slowdown in a global growth, keeping it at 4.1% in 2022.

What are the causes of dip in projections?

• As per IMF, the decrease in projections for global growth are largely driven by the IMF’s assessment of economic prospects in China and the US.
• In US, removal of Build Back Better policy of Joe Biden from the baseline, earlier withdrawal of monetary accommodation, and supply shortages resulted into downward revision of 1.2 percentage points for growth in 2022.
• In China, disruptions related to zero-tolerance Covid policy and protracted financial stress among property developers induced a downward revision of 0.8 percentage point.