The International Monetary Fund’s recently released its World Economy report, which it publishes twice a year in April and October, which indicates that “the worst is yet to come.” India has valid concerns.
What is the World Economic Outlook Report?
- A report from the International Monetary Fund (IMF) called the World Economic Outlook (WEO) includes data on output, inflation, employment, fiscal balances, and debt for its member nations.
- The report provides a prognosis for global growth, an overview of the health of the world economy, and a list of the most significant developments.
- The IMF released the WEO report twice a year, in April and October, based on information gathered through discussions with member country governments.
- Three months following the main WEO report, the IMF also releases two supplemental, less thorough WEO updates.
New World Economy Report -An Inflationary Situation
Growth outlook: The IMF has drastically lowered its projection for global growth, moving it from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. The Russian invasion of Ukraine, the cost-of-living problem brought on by persistent and expanding inflation pressures, and China’s slowdown continue to pose significant challenges to the world economy.
In 2023, more than one-third of the world’s economies will experience declines, while the three biggest economies—the US, the EU, and China—will stagnate. Regarding inflation, it is now predicted to reach a peak of 9.5% in late 2022 and then likely fall to 4.1% only by 2024. Given the transmission of energy prices, the pressure on supply chain costs, and the tight labor market, global core inflation is anticipated to be concerning.
Is There Any Significance for India in this?
India is in a better position at first. The GDP growth rate in India is higher, and the inflation rate is not as high. However, these indicators conceal the fact that, in absolute terms, India is only just emerging from recession in 2020, that a million people there are unemployed, and that it is home to the biggest number of people who live in extreme poverty.
At least four different entities threaten India:
- The global recession will harm exports, slow domestic growth, and widen the trade imbalance.
- Higher costs for crude oil and fertilizer will increase domestic inflation.
- Because of the pressure that a rising dollar will put on the rupee’s exchange rate.
- Our foreign exchange reserves will probably be exhausted, and our capacity to purchase products will likely decline.
Why are the Projections of the International Monetary Fund Report Worrisome?
The IMF also listed several negative risks or explanations for why things might turn out worse than expected.
Miscalibration of the policy is the first risk. This is the largest worry since most economies are in a perilous state, and there is so much uncertainty about what will happen next.
Financial stability and its interactions with the strong US dollar are significant sources of concern. A sudden increase in interest rates might make the weakest link in the global credit network, whether it be pension funds in the UK or more leveraged nations and businesses, more obvious.
Finally, the war in Ukraine carries some geopolitical concerns. All of the aforementioned pressures can become harsher in a dispute that worsens or lasts longer.
Although, world economy report forecasts have been overestimated and underestimated, with the previous two reports producing inaccurate results.