Economic Forecast Current Affairs - 2020

Category Wise PDF Compilations available at This Link

World Bank’s Global Economic Prospect: World Economic Growth projected at 2.5%

On January 9, 2020, the World Bank released its Global Economic Prospect. According to its forecast, the world is expected to grow economically at the rate of 2.5%. This is the lowest prediction since that predicted in 2008-09, 3.1%. By then, the global financial crisis derailed the economy.

Highlights

The report says that investment and trade in the country is expected to recover. However, the downward risks from 2019 are to continue. It also said that the advanced economies are to slip their growth by 1.4% as the manufacturing sector continues to soften.

The emerging markets in the developing economies are to witness acceleration in their growth according to the report. However, this is not applicable to all. A third of developing countries are expected to decelerate this year. Predominantly the growing economies are located in South and South East Asia.

South Asia

Growth in South Asia is expected to rise by 5.5% in 2020. The report predicts India’s growth rate at 5%. It is expected that the credit from non-banking companies to expected to weaken. The report also says that India will see a growth rate of 5.5% in the subsequent year.

The United States is expected to grow at 1.8% and European Union is projected to slip its growth by 1% in 2020.

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India to grow 7.2% in 2018-19 down from earlier projection of 7.4%: Ind-Ra Outlook

Rating agency India Ratings & Research (Ind-Ra) in its Mid-Year FY19 Outlook has revised down India’s growth to 7.2% from its earlier projection of 7.4% for 2018-19 (FY19). The downward revision comes as Indian economy to face headwinds from high crude oil prices, increase in minimum support prices (MSP) of kharif crops, rising trade protectionism, depreciating currency and no visible signs of  abatement of the non-performing assets (NPA) of the banking sector.

Ind-Ra Mid-Year FY19 Outlook Projections

Drivers of Growth: Growth in India is being primary driven by private consumption and government spending. But other two engines of growth – investment and exports – have slowed down.

Capital expenditure: Capex by government alone will be insufficient to revive the capex cycle of the economy. Its share in total capex of economy was only 11.1% during 2012-17. On the other hand, share of private corporations was 40.9%. Private corporations in combination with household sector command 77.5% of total investment in the economy, so their capex revival is important for broad-based recovery in the investment cycle of the economy.

Consumption expenditure: Private final consumption expenditure is projected to grow at 7.6% in 2018-19 compared to 6.6% in 2017-18, while expansion of government final consumption expenditure is expected to slow down to 8.6% from 10.9% during the same period.

Exports: The annual value of exports will touch $345 billion in FY19, crossing peak of $318 billion attained in FY14, but India will continue to face headwinds on the exports front.

Rupee: It has already depreciated 7.7% till July 2018 in response to elevated global turbulence, worsening of current account deficit (CAD), rising inflation and concerns related to fiscal deficit.

CAD: India’s currency account deficit to rise to 2.6% of GDP in 2018-19, up from 1.9 % in the last fiscal year. In absolute terms, it is expected to widen to $ 71.1 billion in 2018-19 from $48.7 billion in 2017-18. Mobilisation of $25 billion from non-resident Indians (NRIs), similar to funds raised in 2013, will be able to finance CAD.

Ind-Ra is one of the India’s most respected credit rating agency that provides ratings, research and rigorous analytics of market in India. The headquarters of Ind-Ra is located in Mumbai and is belong to Fitch group.

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