India is the only major economy forecast to grow in double digits next year and forecast to follow that up with the highest 6.8% rise in the FY23 fiscal.
Policy support and vaccines are expected to lift economic activity across the world, the IMF said in its World Economic Outlook (WEO) update on Tuesday.The latest forecast for India’s FY22 gross domestic product (GDP) marks an upward revision from the 8.8% growth the IMF had estimated in its last assessment in October.
“Notable revisions to the forecast include the one for India (2.7 percentage points for 2021 [FY22]), reflecting carryover from a stronger-than-expected recovery in 2020 after lockdowns were eased,” the IMF said.
The IMF also raised its India forecast for the current fiscal – it said the economy is likely to contract 8% compared with the 10.3% decline it had forecast in October.
The revisions came as July-September quarter GDP surprised on the upside, it said. India’s numbers are based on an April-March fiscal year while for the rest of the world the forecast is for the calendar year.
The results of a survey conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci) earlier this month matched the multilateral lender’s assessment, with the median expectation of FY21 growth at -8%, according to the quarterly Economic Outlook Survey.
The global economy is projected to grow 5.5% in 2021 and 4.2% in 2022, the IMF said.
It attributed the 0.3 percentage point upward revision for 2021 to “expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.”The IMF also saw a narrower 3.5% contraction in world output in 2020 as opposed to a 4.4% decline seen earlier, “reflecting stronger-than-expected momentum in the second half of 2020.”
It warned “surging infections in late 2020 (including from new variants of the virus), renewed lockdowns, logistical problems with vaccine distribution” were risks to this assessment.
Global trade volumes are forecast to grow about 8% in 2021. The IMF expects oil prices to rise in 2021 by just over 20% from the low base for 2020 but they will still remain well below their average for 2019.
Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021, it said.
Multiple vaccine approvals and the launch of mass inoculation campaigns have raised hopes of an eventual end to the pandemic, the IMF said.
It expects vaccines and therapies to become more readily available in the second half of 2021.
“With growing vaccine availability, improved therapies, testing, and tracing, local transmission of the virus is expected to be brought to low levels everywhere by the end of 2022,” the IMF said.
The fund called for robust multilateral cooperation to bring the pandemic under control everywhere and increased funding for the World Health Organisation’s COVAX facility to accelerate access to vaccines for all countries.
The IMF called on advanced economies, which continue to enjoy extremely low borrowing costs, to use the opportunity to provide fiscal support as needed to ensure a lasting recovery.
Emerging economies where debt sustainability was not at risk and inflation expectations were well anchored should also maintain fiscal and monetary support, it suggested.
The report highlighted the pandemic-induced acceleration in inequality by reiterating that close to 90 million people are likely to fall below the extreme poverty threshold during 2020-21 as workers with less education, women, youth, those in contact-intensive sectors, and those informally employed suffer disproportionate livelihood and income losses.
“As noted in the October 2020 WEO, the pandemic is expected to reverse the progress made in poverty reduction across the past two decades,” it said with regard to emerging markets and developing economies.
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