Citing a sharp economic slowdown in India and other emerging markets, the International Monetary Fund (IMF) on Monday lowered growth estimate for the world economy to 2.9 per cent for 2019. Besides, the International Monetary Fund also trimmed India’s growth estimate to 4.8 per cent for 2019, citing stress in the non-banking financial sector and weak rural income growth.
“The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest,” the IMF said.
Presenting the numbers ahead of the start of the World Economic Forum (WEF) annual summit, the IMF said it expected growth in India to be 5.8 per cent in 2020 and rise to 6.5 per cent in 2021 supported by a monetary and fiscal stimulus as well as subdued oil prices.
“Domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth,” India-born IMF Chief Economist Gita Gopinath said.
This comes after data released by the Ministry of Statistics and Programme Implementation (MoSPI) predicted India’s gross domestic product will grow by just 5 per cent in the current financial year (2019-20), the lowest since the 2008 economic crisis. Last financial year, 2018-19, the Indian economy grew at 6.8 per cent.
India’s GDP growth in the July-September quarter of 2019 slowed sharply to 4.5 per cent, the weakest pace in more than six years
Gopinath further said the global growth for 2020 in countries like Argentina, Iran, and Turkey and developing economies like Brazil, India, and Mexico remained highly uncertain because it relied on the improved growth outcomes.
For the global economy, the IMF slightly revised downwards the growth outlook and flagged fundamental issues of reform in trade systems. The new projections estimate growth at 2.9 per cent in 2019, 3.3 per cent in 2020 and 3.4 per cent in 2021. The IMF also revised up China’s growth from 0.2 per cent to 6 per cent for 2020, reflecting the country’s trade deal with the US.
On the positive side, the IMF on Monday said market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out.
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