IMF predicts that India and China will account for half of global growth in 2023

On Monday, January 30, the International Monetary Fund (IMF) published an update to its World Economic Outlook in which it predicted that this year’s rate of global growth will be greater than anticipated. 

Strong consumption and greater investment are largely to blame for this. The growth rate projected for 2023 is 0.2 percentage points higher than the previous estimate, which was published in October 2022.

What does the study have to say about the state of the world?

The analysis predicts that after falling to an estimated 2.9% in 2023 from an estimated 3.4% in 2022, global growth would rise to 3.1% the following year. Additionally, it projects that worldwide inflation would decrease from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, but that it will still be at least 3.5% higher than pre-pandemic levels between 2017 and 2019. This has mostly been due to the fact that since the previous assessment in October, “adverse risks” have “moderated.”

The Washington-based lender has also observed how factors such as Russia’s conflict in Ukraine and central banks raising interest rates to fight inflation continue to have an impact on economic growth. Accelerating vaccination rates in the nation would protect this recovery, according to the IMF report. However, China’s re-opening following the rapid spread of COVID-19 in the country, last year, has also paved the way for a “faster-than-expected recovery.” Severe health consequences in China could “hold back” this advancement, it was added.

According to the research, tighter global finance costs that could increase debt distress and an intensification in the war between Russia and Ukraine are two more factors that could have an impact on global economy. While additional “geopolitical fragmentation” could obstruct economic progress and the announcement of unfavourable inflation could abruptly reprize financial markets.

The research also cited factors that contributed to a boost in predicted growth overall, including stronger-than-anticipated investment and consumption in the third quarter of 2022, a healthy labour market, and strong consumer balance sheets. The IMF’s chief economist, Pierre-Olivier Gourinchas, stated during a news conference that “the year ahead will still be challenging…but it could well signal a turning point with growth bottoming out and inflation dropping,” according to AFP.

After reopening, China is anticipated to have a strong increase in growth.

In its most recent report, the IMF anticipated a sharply high global outlook, which has been lifted to 5.2 percent from the previous 4.4 percent, when China abandoned its zero-Covid policy in response to protests in December. This comes after its growth rate dropped to just 3% last year, which was the lowest it has been in the past 40 years and was also below the global average.

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