International Monetary Fund raises India's growth forecast for FY22 to 12.5%

Ruben Hill
Апреля 6, 2021

The fund now expects global GDP to expand by 6.0% in 2021, a markup from the 5.5% it had projected in January.

The IMF significantly marked up its forecast for US growth, now projecting 6.4% growth in 2021 (compared to 5.1% in its January report).

The IMF indicated that the robust growth is attributed to additional fiscal support in a few large economies, as well as the distribution of vaccines which will fuel recovery in the second half of the year. In fact, India is the only country among major world economies that is projected to grow at a double-digit rate during FY22.

Despite such an optimistic picture of growth for India, however, the country is not expected to reach its pre-Covid-19 GDP level.

After an estimated contraction of 3.3% in 2020 (calendar year), the global economy is expected to grow 6% this year and 4.4% next year, though there are significant divergences within and between countries.

CARE Ratings Chief Economist Madan Sabnavis said 12.5 per cent economic growth for India in the current financial year was "very unlikely", as rising Covid-19 cases were resulting in regional lockdowns. Projections for 2021 are slightly higher than they were in October 2020 due to fiscal support in some large economies and vaccine-supported recovery. However, emerging markets and low income countries are expected to suffer more medium-term than their high income counterparts, according to the International Monetary Fund.

"For the emerging and developing Asia regional group, projections for 2021 have been revised up by 0.6 percentage point, reflecting a stronger recovery than initially expected after lockdowns were eased in some large countries (for example, India)", IMF said.

The sub-Saharan Africa region - which includes Ghana, Kenya, South Africa and Nigeria - continues to feel the pandemic's impacts. Gopinath said policymakers will need to continue supporting their economies while dealing with more limited policy space and higher debt levels than prior to the pandemic. Other nations could take as long as 2023 to recover, the International Monetary Fund indicated.

The IMF also highlighted that income inequality would likely increase significantly, mainly due to the pandemic.

There have also been "learning losses", particularly in low-income and developing countries which had to introduce school closures.

A high degree of uncertainty surrounds IMF's projections, she said, adding that faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade.

Gopinath said it had been a year into the Covid-19 pandemic and the global community was still confronted by extreme social and economic strains, as human toll rose and millions remained unemployed. With multi-speed recoveries, a tailored approach is necessary, with policies well-calibrated to the stage of the pandemic, the strength of the economic recovery, and the structural characteristics of individual countries, she said.

The Washington-based fund's World Economic Outlook also boosted its forecast for the global economy, anticipating vaccine rollouts over the summer that will strengthen economic recovery through the second half of the year.

Moves to bolster the IMF's emergency reserves could provide the US$44 billion needed to vaccinate 70% of the population in lower-and middle-income countries by the end of 2022, at no added cost to rich countries, a new Rockefeller Foundation report finds.

"The global community also needs to work together to ensure that financially constrained economies have adequate access to worldwide liquidity so that they can continue needed health care, other social, and infrastructure spending required for development and convergence to higher levels of income per capita", the IMF report said.

"Right now, the emphasis should be on escaping the health crisis by prioritising health care spending, on vaccinations, treatments, and health care infrastructure".

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