The IMF on Tuesday cut its current forecast for the Indian economy by 0.8 percentage to 8.2%. It cited the economic impact of the Russia-Ukraine war as the primal reason for downgrading the outlook.
IMF research director, Pierre-Olivier Gourinchas, said at a virtual press conference, “We are seeing a significant downgrade in our growth estimates for India, of 0.8 percentage points for 2022 [FY22-23]. India was suffering like many other countries as a consequence of the war and the negative terms of the trade shock due to higher food and energy prices weighing down trade balances. Additionally, external demand was also softening as the rest of the world’s growth was impacted.”
While for the next fiscal year, the international body in its latest World Economic Outlook also projected India’s economy to expand by 6.9% next year, making it to be the fastest-growing large economy over the next two years.
China on the other hand, after posting a robust growth rate of 8.1% in 2021, is projected to slow to 4.4% growth in the current year, followed by 5.1% in the following. Private consumption in China has been negatively impacted by repeated lockdowns and weak recovery in urban employment. Real estate investment growth has also slowed down.
World output is projected to grow by just 3.6% this year and the next, slowing sharply from the 6.1% expansion seen in 2021.
IMF has noted the major burden will fall on Ukraine as expected, as it predicts a massive 35% contraction for Ukraine in 2022. Adding they said, “the conflict would contribute not only to a significant slowdown in 2022 but also to inflation – via trade, commodity markets, and financial channels.”
The IMF expressed lower net exports and weaker domestic demand, with higher oil prices expected to weigh down consumption and investment as the reason for notable growth forecast downgrades in the Asia reason and specifically India and Japan.
The U.S. is projected to grow at 3.7% (in 2022) and 2.3% (in 2023), a 0.3 percentage point downgrade since January’s World Economic Outlook. While in Europe, most of the European countries will experience a negative shack in their terms of trade, through higher energy prices.
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