World Economic Outlook

Context:

In its January update of the World Economic Outlook (WEO) report, the IMF has marginally improved the forecast for global growth in 2023 — a relief, given the fears of a global recession in 2023. The turnaround reflects “positive surprises and greater-than-expected resilience in numerous economies”.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Key takeaways from the latest update
2. World Economic Outlook
3. About International Monetary Fund (IMF)

Key takeaways from the latest update:

Global growth will bottom out in 2023

• The IMF previously forecasted that the global growth rate would drop from 3.4% in 2022 to 2.7% in 2023, but has now revised the outlook.
• A global recession is no longer expected by the IMF.
• The global growth rate is projected to hit its lowest point in 2023 before picking up again in 2024.
• The IMF now predicts global growth to be 2.9% in 2023 and 3.1% in 2024.
• Upward revisions in 2023 GDP forecasts have been seen in China, Russia, US, Germany, and Italy.
• The UK saw a significant decrease in its 2023 GDP forecast, almost 1 percentage point.

Global inflation has peaked but relief will be slow

• Global inflation is expected to have peaked in 2022.
• The disinflation (decrease in inflation rate) is expected to be slow and occur throughout 2023 and 2024.
• 84% of countries are expected to have lower headline inflation in 2023 compared to 2022.
• Global inflation is forecast to decrease from 8.8% in 2022 (annual average) to 6.6% in 2023 and 4.3% in 2024, still above the pre-pandemic levels of around 3.5%.
• The slowing of inflation is due to monetary tightening worldwide and decreasing demand for goods and services.
• Advanced economies are expected to have an inflation rate of 4.6% in 2023, while emerging economies will face an inflation rate of 8.1%.

India will stay the world’s fastest growing major economy in 2023 and 2024

• India’s Growth Outlook Remains Unchanged Since October 2022 According to the IMF, India’s growth is projected to decrease from 6.8% in 2022 to 6.1% in 2023 before rebounding to 6.8% in 2024.
• This is due to the resilient domestic demand despite external challenges. As a result, India will remain the fastest-growing major economy in the world both in 2023 and 2024, outpacing other comparable economies such as China (which is expected to grow at 5.4% in 2023 and 4.5% in 2024).

World Economic Outlook

• It is a survey by the IMF that is usually published twice a year in the months of April and October.
• It analyzes and predicts global economic developments during the near and medium term.
• The IMF releases the WEO twice every year, in April and October, apart from updating it twice — in January and July.

About International Monetary Fund (IMF)

• The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C.
• It consists of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It periodically depends on the World Bank for its resources.
• Through the fund and other activities such as the gathering of statistics and analysis, surveillance of its members’ economies, and the demand for particular policies, the IMF works to improve the economies of its member countries.

Functions of the IMF

• To provide financial assistance to member countries with balance of payments problems, the IMF lends money to replenish international reserves, stabilize currencies and strengthen conditions for economic growth.
• Countries must embark on structural adjustment policies monitored by the IMF.
• It oversees the international monetary system and monitors the economic and financial policies of its 189 member countries.
• As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments.
• It provides technical assistance and training to central banks, finance ministries, tax authorities, and other economic institutions.
• This helps countries raise public revenues, modernize banking systems, develop strong legal frameworks, improve governance, and enhance the reporting of macroeconomic and financial data.
• It also helps countries to make progress towards the Sustainable Development Goals (SDGs).

-Source:  Indian Express