The International Monetary Fund (IMF) has cut China's GDP growth forecast for the financial year 2023-24 to 5.30 per cent, 20 basis points lower than its July estimate. Many emerging market economies proved quite resilient and surprised on the upside, with China an exception, which was facing growing headwinds from its real estate crisis and weakening confidence, IMF noted in its latest World Economic Outlook report.
IMF said the real estate crisis in China could deepen, an important risk for the global economy. "China's property sector crisis could deepen, with global spillovers, particularly for commodity exporters." Notably, Country Garden and Evergrande, two of China's largest developers, are at the centre of the spiralling property crisis as they reportedly face huge losses, high debt and missed payments to lenders. For the Euro Area too, it cut the growth estimate by 20 basis points to 0.7 per cent for 2023-24. For the US, it, however, raised growth projection by 30 basis points to 2.1 per cent. "The global economy continues to recover slowly from the blows of the pandemic, Russia's invasion of Ukraine, and the cost-of-living crisis. In retrospect, the resilience has been remarkable.
Despite the disruption in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the global economy has slowed, but not stalled," IMF said. "Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting," IMF noted.
Global economic activity bottomed out at the end of last year while inflation is gradually being brought under control. But IMF said a full recovery toward the pre-pandemic era appears increasingly out of reach, especially in emerging and developing economies. According to the multilateral agency, India is expected to grow by 6.3 per cent this fiscal year, 20 basis points (100 basis points is equal to 1 percentage point) higher than what it had estimated in its previous report. IMF attributed stronger-than-expected consumption in India during April-June for the upward projection in the growth estimate. The agency has raised India's growth outlook for the second time since April - from 5.9 per cent in April, 6.1 per cent in July, and 6.3 per cent now, taking it closer to the 6.5 per cent predicted by the country itself.
For 2024-25 too, the IMF pegged India's GDP growth at 6.3 per cent, unchanged from its earlier two projections. IMF projected India's consumer inflation at 5.5 per cent this fiscal, against RBI's 5.4 per cent forecast for. RBI expects Q2 (Jul-Sep) inflation at 6.4 per cent, Q3 (Oct-Dec) at 5.6 per cent and Q4 (Jan-Mar) at 5.2 per cent. For Q1 (2024-25 fiscal), it is projected at 5.2 per cent.
Overall, IMF forecasted that global growth to slow from 3.5 per cent in 2022 to 3.0 per cent in 2023 and 2.9 per cent in 2024, well below the historical (2000-19) average of 3.8 per cent. Advanced economies are expected to slow from 2.6 per cent in 2022 to 1.5 per cent in 2023 and 1.4 per cent in 2024 as monetary policy tightening starts to bite.
Emerging markets and developing economies are projected to have a modest decline in growth from 4.1 per cent in 2022 to 4.0 per cent in both 2023 and 2024. Global inflation is forecast to decline steadily, from 8.7 per cent in 2022 to 6.9 per cent in 2023 and 5.8 per cent in 2024, due to tighter monetary policy aided by lower international commodity prices.
