On 16th July 2024, The International Monetary Fund (IMF) released ‘World Economic Outlook (WEO) Update, July 2024: The Global Economy in a Sticky Spot’. The report has increased India’s GDP(Gross Domestic Product) growth by 20 basis points(bps), from 6.8% (in April 2024 ) to 7% for FY25(2024-25).
- This upward projection of India’s GDP is mainly driven by both an upward revision to the FY24 as well as improved consumption prospects, particularly in rural areas of the country.
- However, the IMF retained its India’s GDP projection for FY26 (2025-26) at 6.5%. India’s GDP expanded at 8.2 percent in 2023-24.
Global Scenario:
i.As per the report, the global growth is projected to be in line with April 2024 WEO forecast at 3.2% in 2024 but it has marginally increased the global growth rate by 10 bps to 3.3% in 2025.
ii.The report cited that growth in India and China will account for almost 50% of global growth in 2024. Also, growth in major advanced economies is becoming more aligned as output gaps are closing.
- For example: The United States (US) shows increasing signs of cooling, especially in the labour market, after a strong 2023. Meanwhile, euro area is likely to grow after a nearly flat performance last year.
- But still, global growth prospects for the next 5 years will remain weak, largely due to waning momentum in emerging Asia.
iii.Advanced Economies: As per the report, the growth rate of Advanced economies will remain same from the previous forecast, at 1.7% for 2024 and 1.8% for 2025.
- The report decreased the growth rate for the US by 10 bps, to 2.6%in 2024 which reflects the slower-than-expected start of the year.
- Further, the growth rate is expected to decrease to 1.9% in 2025 as the labour market cools and consumption moderates, with fiscal policy starting to tighten gradually.
iv.Emerging Markets and Developing Economies (EMDEs): The report has revised upward growth for EMDEs by 10 bps, at 4.3% for both 2024 and 2025.
- The projected increase is due to strong activity in Asia, particularly in China and India.
- The report has revised upward GDP growth for China, to 5% (2024) from 4.6 %( projected in April 2024 WEO ), mainly on account of a rebound in private consumption and strong exports in the 1st quarter.
- However, EMDEs GDP in 2025 is projected to slow to 4.5% and to continue to decelerate over the medium term to 3.3% by 2029, due to headwinds from aging and slowing productivity growth.
Global Inflation:
i.The report cited that the Global inflation will continue to decline. The revised forecast in advanced economies is for the pace of disinflation to slow in 2024 and 2025, due to prices for services is now expected to be more persistent and commodity prices higher.
- In April 2024, IMF ‘s WEO April 2024 report projected that inflation will decrease to 5.9% in 2024 from 6.7% in 2023, broadly on track for a soft landing.
ii.The report highlighted that the gradual cooling of labor markets, together with an expected decline in energy prices will help to bring the headline inflation back to target by the end of 2025.
- Inflation is more likely to remain higher in EMDEs than in Advanced Economies.
iii.The report noted that overall, risks to the outlook remain balanced, but cautioned about some near-term risks that have gained prominence such as: upside risks to inflation that arises from a lack of progress on services disinflation and price pressures increasing from renewed trade and geopolitical tensions.
- Risks of persistent inflation in services sector are related to both wage and price setting, given that labor accounts for a high share of the costs in that sector.
About International Monetary Fund(IMF):
Managing Director(MD)- Kristalina Georgieva
Member nations–190
Headquarters- Washington D.C., United States of America(U.S.A.)
Established in-1944
