IMF cuts global growth forecast to 3.6%, India's FY23 growth to 8.2%

The downgrade in the outlook was due to the economic impact of the Russia-Ukraine war, IMF said.

The IMF's latest World Economic Outlook also projected India’s economy to expand by 6.9 per cent next year.

World output is now projected to grow by 3.6 per cent this calendar year and the next, slowing sharply from the 6.1 per cent expansion seen in 2021.

“The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution,” the IMF said forecasting a massive 35 per cent contraction for Ukraine in 2022. The conflict, the Fund noted, would contribute not only to a ‘significant slowdown’ in 2022, but also to inflation—via trade, commodity markets and financial channels.

Japan and India are witnessing ‘notable’ growth forecast downgrades in the Asia region, partly because of lower net exports and weaker domestic demand, with higher oil prices expected to weigh down consumption and investment, it said.

The global economy was becoming fragmented with countries cutting off ties with Russia, the ‘rules-based frameworks’ are being threatened, and pandemic-induced lockdowns in China are exacerbating supply-chain disruptions, the document noted.

The United States is projected to grow at 3.7 per cent in 2022 and 2.3 per cent in 2023, a 0.3 percentage point downgrade since January’s release of the Outlook. The euro area is expected to grow at 2.8 per cent and 2.3 per cent this year and next respectively.

Most European countries will experience a negative shock in their terms of trade, through higher energy prices. Additionally, they are also feeling the effects of disrupted supply chains. Downgrades across the eurozone are offset by fiscal expansion, IMF said.

Russia’s economy is expected to contract at a rate of 8.5 per cent this year and shrink by 2.3 per cent next year under the pressure of sanctions.

China–after growing by 8.1 per cent in 2021—is projected to slow to 4.4 per cent growth this year, followed by 5.1 per cent in the next. Private consumption in China has been affected by repeated lockdowns and weak recovery in urban employment.

ALCHEMPro News Desk (DS)