Why IMF cut India, global growth forecasts and thinks 2023 will feel like a recession

The series of gloomy economic forecasts for the world economy keep coming.

The International Monetary Fund (IMF) has said that 2023 will be a tough year for the global economy as it cut growth predictions and forecast economic contraction in a third of the world.

“The worst is yet to come,” the global financial institution said in its latest World Economic Outlook report. “For many people, 2023 will feel like a recession.”

What growth numbers has the IMF predicted?

The IMF has lowered its estimates for global growth rate for 2023, compared with what it expected in July. Now, it expects 2.7% growth next year. this is down from the 6% growth experienced last year and the 3.2% growth forecast earlier for this year.

How bad are these numbers?

This is the “weakest growth profile” since 2001, excluding the acute phase of the Covid-19 pandemic and the global financial crisis of 2008-2009, the IMF said.

It reflects “significant slowdowns” for the largest economies as gross domestic product (GDP) of the US contracted in the first half of 2022, followed by the Euro area’s contraction in the second half of 2022, and prolonged Covid-19 outbreaks and lockdowns in China with a growing property sector crisis.

How long will the world keep facing such uncertainties?

The IMF said the world is in a volatile period: economic, geopolitical, and ecological changes all impact the global outlook, it said. About a third of the world economy faces two consecutive quarters of negative growth, it noted.

What has the IMF said on India’s growth rate?

India is projected to grow at 6.8% in the current fiscal year, following 8.7% growth in the fiscal year that ended March 31 as per figures released in the IMF’s October 2022 World Economic Outlook: Countering the Cost-of-Living Crisis. Previously, it projected a growth rate of 7.4%.

And what about inflation?

The IMF has said that global inflation is forecast to rise from 4.7% in 2021 to 8.8% in 2022 but to decline to 6.5% in 2023 and to 4.1% by 2024.

What does the IMF have to say on monetary policy?

“Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy,” the IMF said.

“Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation,” it said.