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Monday, September 27, 2021

Covid second wave hits recovery: IMF cuts FY22 growth forecast to 9.5%

Its April forecasts hadn’t factored in the impact of the resurgence of Covid infections in India.

By: ENS Economic Bureau | Washington |
Updated: July 28, 2021 3:20:20 am
For 2022-23, IMF expects economic growth of 8.5 per cent, larger than the 6.9 per cent it had projected in April | Representational image

The International Monetary Fund (IMF) on Tuesday slashed its FY22 growth forecast for India by 300 basis points (bps) from its April projection to 9.5 per cent, the sharpest cut for any country, citing the damage caused by the second Covid wave that peaked in May. For the next fiscal, however, the Fund has raised the growth projection for the country to 8.5 per cent from 6.9 per cent.

Its April forecasts hadn’t factored in the impact of the resurgence of Covid infections in India.

While the multilateral body retained its global growth forecast at 6 per cent for 2021, it trimmed its earlier projection by 40 bps for developing countries and raised it by 50 bps for advanced economies. Risks around the global baseline projections are, however, to the downside, it cautioned. Countries lagging in vaccination, such as India and Indonesia, would suffer the most among G20 economies, it added.

The IMF also revised up its predictions of global trade volume growth by a sharp 130 bps for 2021 to 9.7 per cent and 50 bps for 2022 to 7 per cent. India is set to benefit from an expected rise in global trade prospects once its supply side gains traction.

“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising Covid death tolls,” IMF said in its latest World Economic Outlook forecast. —FE

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