Opinion Express View on IMF forecast: Global growth is looking up

In the July update of its world economic outlook, the International Monetary Fund has raised its forecast for global growth this year, signaling that the underlying economic momentum is stronger than previously believed. The IMF now expects the world economy to grow at 3 per cent in 2023, up 0.2 percentage points from its estimate in April. This upward revision reflects improving prospects across both advanced economies as well as emerging market and developing countries. Alongside, the Fund now expects global inflation to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023, and further to 5.2 per cent in 2024. Core inflation, though, is expected to fall more gradually — from 6.5 per cent in 2022 to 4.7 per cent in 2024. This does suggest that, in parts of the world, interest rates are likely to be higher for longer.

The Fund’s forecasts show that even though growth for advanced economies has been revised upwards for this year, it will slow down from 2.7 per cent in 2022 to 1.5 per cent in 2023. In comparison, emerging economies are expected to sustain their growth momentum — the IMF expects them to grow at 4 per cent this year as well. But, with several economies witnessing significant upward revisions to their growth estimates — for instance, Brazil’s growth forecast has been revised upwards by 1.2 percentage points, Spain by 1 percentage point, Russia by 0.80 percentage points, and UK by 0.70 percentage points — it does indicate that economic activity has across the board proven to be more resilient than previously believed.

Advertisement

The IMF now expects the Indian economy to grow at 6.1 per cent in 2023, up 0.2 percentage points from its earlier estimate. Growth is expected to edge upwards to 6.3 per cent in the year after. The upward revision is premised on continuing momentum from the stronger than expected growth in the last quarter — a consequence of healthy investment activity. Data from the National Statistical Office had shown that investments rose by 8.9 per cent during January-March, up from 8 per cent during October-December. The IMF isn’t alone, however. Fitch has recently raised its forecast for the Indian economy to 6.3 per cent, from 6 per cent earlier. And the Asian Development Bank has retained its growth forecast at 6.4 per cent. But considering the downside risks to growth, in an uncertain global and domestic environment, the priorities for policy makers, as the Fund has also underlined, remain the same — bring down inflation, maintain financial stability and rebuild fiscal buffers.