IMF boosts India’s economic outlook, says global growth will remain weak

The International Monetary Fund has upgraded its economic forecast for India to 2024, while warning that growth will decline next year.

India – which the IMF had previously called “the world’s fastest growing large economy” – is expected to grow by 7% in 2024, higher than the April forecast of 6.8%. This can be largely attributed to improvements in private consumption, especially in rural parts of the country, the report said.

This is a sharp drop from growth of 8.2% in the fiscal year from April 2023 to March 2024. Growth will continue to decline and reach 6.5% in 2025, the finance agency said.

The world’s most populous country, which Goldman Sachs says will be the world’s second-largest economy by 2075, has attracted investors such as tech giants. Apple THE Google as the country works to become a manufacturing powerhouse.

“The emerging market economies of Asia remain the main engine for the global economy. Growth in India and China has been revised upwards and accounts for almost half of global growth. However the outlook for the next five years remains weak,” Pierre-Olivier Gourinchas, chief executive of the IMF. said the economist.

China’s economy is expected to grow by 5% this year, unchanged from the IMF’s May forecast. That’s higher than the April forecast of 4.6%, but lower than the 5.2% expansion in 2023, the IMF said on Tuesday.

GDP in the world’s second-largest economy is expected to slow further in 2025 to 4.5% and be on a downward trajectory to 3.3% by 2029, according to the IMF’s latest World Economic Outlook in July.

The better forecast for 2024 was partly due to stronger consumer and export activity in the first quarter of the year, Gourinchas noted.

“The Chinese economy has grown tremendously in the last 15-20 years and is much less dependent overall on the external sector for its growth than it was maybe 15 years ago or 20 years ago,” he told a conference. for press.

“By the very fact that China is also bigger, that means it has a bigger footprint in the rest of the world. An increase in the trade surplus may be small from the Chinese perspective, but it could be large from the perspective of the rest of the world”.

Gourinchas noted that these forecasts were made before China’s latest GDP numbers were released.

Ahead of the IMF report on Tuesday, official Chinese data showed its economy grew 4.7% year-on-year in the second quarter – falling short of the 5.1% growth expected by economists polled by Reuters.

“They show … that perhaps growth in China — especially consumer confidence and problems in the property sector — are still ongoing,” Gourinchas warned. “That’s something that we flag in our data as a risk to the Chinese economy. And that looks like maybe it’s materializing.”

The IMF said it is optimistic about a rebound in consumption in the coming years, but falling birth rates will hamper productivity levels and in turn slow the economic downturn.

Growth from India and China will account for almost half of global growth this year.

Global growth in 2024 is expected to rise by 3.2% – unchanged from the April forecast and likely to pick up slightly to 3.3% in 2025, the IMF said.

The US economy is forecast to inch higher at 2.6% this year compared to 2023, slightly lower than its forecast of 2.7% in April.

The inflation rate for the world’s largest economy is easing and fell to 3% in June, from 3.3% in May.

Federal Reserve Chairman Jerome Powell said Monday that the central bank will not wait until inflation hits 2% to cut interest rates, adding that a “hard cut” for the economy is unlikely on the books.

“It looks like inflation dynamics are moving, at least in the US, in the right direction,” Gourinchas said.

“But we’ve seen bumps in the road and we have to anticipate that there could probably be more and there could be some delays in the pace and speed at which inflation will come down now.”

He emphasized that the US public debt remains a serious concern.

Eurozone growth for this year improved to 0.9% – 0.1 percentage points higher than April forecasts, driven by stronger services momentum and stronger-than-expected net exports in the first half of 2024.

Growth in the region is projected to increase to 1.5% in 2025, as a result of rising real wages and more investment, the IMF said.

“Spain is a bright spot in the euro area in terms of revisions. We have upgraded the forecast for this year to 2.4%,” noted Petya Koeva Brooks, deputy director in the IMF’s research department.

“A large part of that revision was due to the result that we saw in the first quarter of this year, where there were very strong services, exports, as well as investment growth.

Clarification: This story has been updated to reflect that the IMF’s latest forecast for China’s growth remains unchanged from May.