The International Monetary Fund on Monday said global growth would reach 3.3% in 2020, compared to 2.9% in 2019 – which was the slowest pace since the financial crisis a decade ago.
The estimates for both years were cut by 0.1% from forecasts made in October because the slowdown in India was sharper than expected. “A more subdued growth forecast for India accounts for the lion’s share of the downward revisions,” the monetary fund said its latest World Economic Outlook projections.
“The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years,” it added. “In a few cases, this reassessment also reflects the impact of increased social unrest.”
The monetary fund said the Indian economy is estimated to grow 4.8% in 2019-’20, and said growth was projected to improve to 5.8% in 2020-’21 and 6.5% in 2021-’22. In October, it had predicted an expansion of 6.1% in 2019-’20. India’s “domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector and a decline in credit growth”, the IMF said on Monday.
The Indian economy grew 4.5% in the July-September 2019 quarter, the slowest in six years. The economy has been affected by weak consumption and job cuts. Last week, the government predicted 5% Gross Domestic Product growth rate for 2019-’20 – the lowest in 11 years.
The Washington-based organisation said easing of tensions between the United States and China, whose GDP growth stunted in 2019, had boosted market sentiment amid “tentative” signs that trade and manufacturing were bottoming out.
“These early signs of stabilisation could persist and eventually reinforce the link between still-resilient consumer spending and improved business spending,” the IMF said. The fund cited uncertainty over tariffs and its negative effects on business investment as the biggest factor in limiting growth.
IMF Chief Economist Gita Gopinath told NDTV there were signs of stabilisation and recovery in the global economy. She added that climate change was a major danger to global economy.
“Given the size of the Indian economy in the global GDP right now, if you have a significant downward revision for India, then it does have an impact on global growth,” Gopinath told the news channel. “So we revised global growth down for 2019 by 0.1% and the vast majority of that comes from the downgrade for India.” The Indian economy, the fifth largest in the world, is worth almost $3 trillion.
Gopinath said there was stress in non-banking financial corporations. She added that credit growth, business sentiment and the growth of rural incomes were weak. However, she added that India’s growth rate could rise to 6.5% by 2021, “supported by monetary and fiscal stimulus as well as subdued oil prices”.