IMF lowers global growth forecasts largely over ‘slowdown’ in India

Gita Gopinath says some risks have partially receded with developments on US-China trade deal

Gita Gopinath
Gita Gopinath spoke about the importance of global cooperation in order to enhance global economic recovery and the current economic scenario in India, among other topics. Photo: Facebook

The International Monetary Fund (IMF) on Monday (January 20) lowered the growth outlook for the global economy, saying the slight downward revision of 0.1% for two years and 0.2% for the year after that in the global growth was largely due to downward revision for India estimates.

The new projections estimate growth at 2.9% in 2019, 3.3% in 2020 and 3.4% in 2021. Ahead of the inaugural of the World Economic Forum (WEF) annual summit here, IMF Managing Director Kristalina Georgieva said the fund’s simplest advice to policymakers is that they should keep doing what works.

She cautioned that everyone must be ready to act again and immediately in a coordinated manner if growth begins to slow down again. Noting that a turning point is yet to be reached, the IMF said it was slightly revising downwards the growth outlook for the global economy.

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Fundamental issues of reform in trade systems are still there and we have seen there have been some developments in the Middle East, Georgieva said.

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Chief economist of the Fund, Gita Gopinath said some risks have partially receded since October with developments on US-China trade deal. China’s growth has been revised upward by 0.2% to 6% for 2020, reflecting the trade deal with the United States, she added.

“The projected recovery for global growth remains uncertain; it continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilises at close to current levels,” IMF chief economist said.

The slight downward revision of 0.1% for 2019 and 2020, and 0.2% for 2021, is owed largely to downward revisions for India, she said. For emerging market and developing economies, we forecast a pickup in growth from 3.7% in 2019 to 4.4% in 2020 and 4.6% in 2021, a downward revision of 0.2% for all years, said the Gopinath.

She said the biggest contributor to the revision is India, where growth slowed sharply owing to stress in the nonbank financial sector and weak rural income growth.

(With inputs from agencies)

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