World Economic Outlook Current Affairs

IMF retains India 2017 GDP growth forecast at 7.2%

The International Monetary Fund (IMF) in its July World Economic Outlook (WEO) Update has retained India’s projected GDP growth rate at 7.2% for 2017-18, slightly up from 7.1% in the previous year.

However, update projects that India’s growth would accelerate to 7.7% in 2018-19. India’s economic growth slowed down to 7.1% in 2016-17, sharply lower than 8% in 2015-16 due to the effect of demonetisation.

Key Highlights of WEO Updates

Global Scenario: The global economic growth rate will be 3.5% in 2017 and 3.6% in 2018. The economic activity in both advanced and emerging and developing economies is accelerating. Moreover, inflation in advanced economies remains subdued and generally below target and also declining in several emerging economies.

United States growth projections are lower than in April WEO update, primarily reflecting that its fiscal policy will be less expansionary going forward than previously anticipated. The growth also has been revised up for Japan and especially the Euro area, indicating solid momentum in activity in late 2016 and early 2017. Growth in the ASEAN-5 economies is projected to remain robust at around 5 % with increase in global trade and strengthening domestic demand.

Indian Economy: It will be fastest growing major economy in the world and in Asia. According to government estimate, Indian economy is expected to grow 7.5% in the current financial year as abundant monsoon as rains are expected to boost rural income and overall growth.

China’s economy: It is projected to grow by 6.7% in 2017, up 0.1% points from the April 2017 forecast, and 6.4% in 2018, up by 0.2% points from earlier forecasts by the IMF. Despite China’s rise in growth projections, India’s economy will still be the fastest growing among large economies.

About World Economic Outlook (WEO)

The WEO is a survey conducted and published by the IMF. It is published biannually and partly updated two times a year. It portrays the world economy in the near and medium context, with growth projections for up to four years into the future. WEO forecasts include key macroeconomic indicators, such as GDP, inflation, fiscal balance and current account of more than 180 countries around the globe. It also deals with major economic policy issues.

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IMF cuts India’s FY17 growth rate to 6.6% from 7.6%  

The World Economic Outlook (WEO) update released by the International Monetary Fund (IMF) has cut India’s growth rate for the fiscal year 2016–17 to 6.6% from its previous estimate of 7.6%.

India’s growth rate was cut due to the temporary negative consumption shock of demonetisation. It has dampen India’s growth by 1% point in the FY2017 and 0.4% point in FY2018, compared with IMF’s earlier projections.

Key highlights of IMF’s Outlook
  • Global economic activity will pick up pace in FY17 and FY18, especially in emerging markets and developing economies. Global growth is forecast at 3.4% in FY17 against 3.1% in FY16.
  • There is marginal upward shift in prospects for the US and China until 2018 but India, Mexico and Brazil are among the large economies that have had their projections revised downwards.
  • For China, the growth forecast for FY 2017 was revised upwards, to 6.5%, 0.3% point above the October 2016 forecast. In 2018, China’s growth rate is projected to be 6% against India’s 7.7%.
  • The recent election of Donald Trump as US President could have a positive impact on US economy, but extent of it could not be gauged immediately.
  • The stimulus policies expected and already underway in US and China will hold world economy from further slowdown and result in rise of global growth.
  • India’s Demonetisation move led to shortage of currency causing a slump in demand and widespread job losses dampening growth.
  • Other Asian countries such as Thailand and Indonesia will also face headwinds in medium term.

IMF forecast

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