IMF Cuts World Growth Target, Retains India Forecast
The International Monetary Fund (IMF) has retained India's growth projections at 7.5 per cent for 2016-17 and 2017-18 each, even as it cut its forecast for the global economy by two percentage points for 2016 and 2017 calendar years on depressed oil and commodity prices.
The World Economic Outlook Update by the IMF came on a day when data showed that the Chinese economy slowed in December, capping the weakest quarter of growth since the 2009 global recession.
Though China's economic growth projections have been retained at 6.3 per cent and 6 per cent for 2016 and 2017 respectively, the economic expansion would come down from 6.9 per cent in 2015. On the other hand, Indian economy is expected to grow at 7.3 per cent in 2015-16.
"Growth in China is expected to slow to 6.3 per cent in 2016 and six per cent in 2017, primarily reflecting weaker investment growth as the economy continues to rebalance. India and the rest of emerging Asia are generally projected to continue growing at a robust pace, although with some countries facing strong headwinds from China's economic rebalancing and global manufacturing weakness," the IMF said in the Update.
The Fund scaled down world economic growth at 3.4 per cent in 2016 and 3.6 per cent in 2017. The comparative figures were 3.6 per cent and 3.8 per cent in the October outlook.
The IMF cut economic growth projection of emerging markets by 0.2 percentage points, higher than one percentage point in case of advanced economies, both for 2016 and 2017. However, global growth is likely to be marginally better in 2016 and 2017 compared with 3 per cent in 2015.
"The pickup in global activity is projected to be more gradual than in the October 2015 World Economic Outlook (WEO), especially in emerging markets and developing economies," the IMF said.
The projected pickup in global growth in the next two years - despite the ongoing slowdown in China - primarily reflects gradual improvement in countries that are currently in economic distress, notably Brazil, Russia, and some countries in west Asia. However, even the partial recovery could be frustrated by new economic or political shocks, the Fund said.
Advanced economies are expected to have grown by 1.9 per cent in 2015, slightly higher than 1.8 per cent a year ago. In 2016 and 2017, they are likely to grow by 2.1 per cent each.
Emerging market economies, on the other hand, expanded by about four per cent in 2015, much slower than 4.6 per cent a year ago. In 2016 and 2017, they would grow by 4.3 per cent and 4.7 per cent respectively. The growth rate witnessed in 2014 is expected to somewhat return only in 2017.
In advanced economies, the Fund said, a modest and uneven recovery is expected to continue, with a gradual further narrowing of output gaps.
On the other hand, "The picture for emerging market and developing economies is diverse but in many cases challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economies will continue to weigh on growth prospects in 2016-17," it said.
Even as IMF retained growth projections for India's economy for the current financial year, it should be noted that it represents stagnation in growth compared to 2014-15. Besides, it also implied that the growth would be only bit higher in the second half of the current financial year, since the first half yielded expansion at 7.2 per cent.
India's finance ministry now expects the economy to grow 7-7.5 per cent in the current financial year against 8.1-8.5 per cent projected by it earlier.
Data provided by IMF also showed that India will have to diversify its exports to developing countries since they would see increase in their imports in 2016 and 2017 compared to 2015.
World trade in volume terms was projected to grow by 3.4 per cent in 2016, 0.7 percentage points lower than earlier estimates, and 4.1 per cent in 2017, slower by 0.5 per centage points over the October estimate. The growth was 2.6 per cent in 2015.
Imports into the advanced world, were forecast to increase 3.7 per cent in 2016, which would be less by 0.5 percentage points over previous estimates, and 4.1 per cent the next year, lower by 0.4 percentage points than the October estimates. The imports were projected to have grown 4 per cent in 2015.
Imports into the emerging markets and developing economies, on the other hand, were projected to grow 3.4 per cent and 4.3 per cent in 2016 and 2017, respectively against earlier estimates of 3.5 per cent and 5.4 per cent respectively. The imports were expected to have risen just 0.4 per cent in 2015.
Merchandise exports from India shrank for the 13th straight month in December, longest-ever such decline in the recent history.