World Economic Outlook

World Economic Outlook

News: Recently, the International Monetary Fund (IMF) has released its World Economic Outlook 2023 titledNavigating Global Divergence.

Key Findings:
• The IMF expects global GDP (Gross Domestic Product) growth to be 3% in 2023, which is the same as its July 2023 forecast.
• The Chinese economy is expected to grow at 5% in 2023, which is higher than the 3% it grew at in 2022.
• The IMF expects Global inflation in 2024 to rise at 5.8%, faster than the 5.2%
• Growth has lagged on account of Tight Monetary Policies as central banks have kept money supply tight to fight Inflation which rose to 8.7% in 2022.
• Investment is lower than pre-pandemic levels, influenced by higher interest rates and stricter lending conditions.

India specific findings:
• India’s GDP for 2023-24 will be 6.3%, a 20-basis point increase from the July 2023 numbers.
• The IMF’s 2023-24 growth forecast for India is now the same as what the World Bank (WB) had projected in its India Development Update.
• India’s 2024-25 GDP growth forecast has been left unchanged at 6.3%.
• While the IMF’s upward revision of India’s 2023-24 GDP growth comes in the wake of a strong 7.8% growth in the quarter ending June 2023, the annual growth number is still lower than the 6.5% projection by RBI’s Monetary Policy Committee (MPC).

Key recommendations:
• Encourage business investment to boost economic growth, as seen in the US, where stronger business investment has contributed to the upgraded growth forecast.
• Economic divergence across major economies, particularly in the eurozone, should be closely monitored, and the factors causing contraction or slower growth in certain regions need to be addressed.
• Exercise caution in managing inflation and monetary policy. The IMF emphasized that globally synchronized central bank tightening is essential to control inflation and maintain economic stability.