According to recent data released by the International Monetary Fund (IMF), a rise in global growth is projected. The estimated growth rate for 2019 was 2.9%, and it is expected to rise to 3.3% in 2020, finally reaching 3.4% in 2021. However, this growth trend represents a downward revision from the estimates made in October 2019’s World Economic Outlook (WEO) by IMF. The reduction is 10 basis points for both 2019 and 2020, and 20 points for 2021.
Key Downward Revisions for India
Forecasts for India by the IMF have been revised downwards. There is a substantial reduction in growth estimates for 2019, down to 4.8% from the previous projection of 6.1% made in October. For the upcoming year 2020, the IMF foresees a further cut in India’s growth forecast by 1.2 points, bringing it down to 5.8%. This significant reduction is the largest among emerging markets, impacting the broader global growth forecast as well.
Several reasons have been cited for the reduced growth estimate. Prominent among them are the stress reported in the non-bank financial sector and a slowdown in rural income growth. The situation is expected to improve in 2020 due to fiscal and monetary stimulus, coupled with relatively low oil prices.
Implications for Global Economy
The anticipated pickup in global growth for 2020 remains shrouded in uncertainty. Improved growth outcomes are expected from stressed economies like Argentina, Iran, and Turkey. Additionally, efforts are underway to bolster the underperforming emerging and developing economies such as Brazil, India, and Mexico.
Hints of bottoming out have been observed in the decline of manufacturing and trade. This is believed to be due, in part, to improvements in the auto sector combined with diminishing fears surrounding a no-deal Brexit. The Brexit refers to the scenario where the UK leaves the European Union (EU) without any agreements in place about their future relationship.
The proposed US-China Phase I deal, aimed at reducing trade tensions, could also support global growth. If durable, it could cut down the projected negative impact on global GDP from 0.8% to 0.5% by the end of 2020.
The collective growth in the 19 countries that use the euro currency is predicted to rise gradually. From 1.2% in 2019, it is expected to hit 1.3% in 2020 and then reach 1.4% in 2021.
IMF Projected Growth: By the Numbers
| Year | Global Growth | India’s Growth |
|---|---|---|
| 2019 | 2.9% | 4.8% |
| 2020 | 3.3% | 5.8% |
| 2021 | 3.4% | n/a |
