World Economic Outlook (WEO): IMF

In News 

• The International Monetary Fund (IMF), in its latest World Economic Outlook report, cuts global growth sue to Russia- Ukraine war

World Economic Outlook (WEO

• It is a report by the International Monetary Fund (IMF) that analyzes key parts of the IMF’s surveillance of economic developments and policies in its member countries. 
• It also projects developments in the global financial markets and economic systems.
• The WEO is released in April and September/October each year.
• Report Provides:
  • Analysis and forecasts of economic developments and policies in its member countries.
  • Encapsulates the state of the global economy and highlights risks and uncertainty that could threaten growth.
  • This report is the main instrument of disseminating the findings and analysis of their global surveillance activities to the world.

Major Highlights 

• Global: 
  • Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. 
    • This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January. 
  • Growth projections for 2022

Image :Courtesy: BS

• The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. 
  • At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation.
  •  Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest.

• For India:
  • It has slashed its forecast for India’s FY23 gross domestic product growth to 8.2 percent from 9 per cent
    • It downgraded the outlook for global growth citing the economic impact of the Russia-Ukraine war.
    • It also projected India’s economy to expand by 6.9% next year, putting it on course to be the fastest growing large economy over the next two years.
  • Japan and India were seeing “notable” growth forecast downgrades in the Asia region, partly because of lower net exports and weaker domestic demand, with higher oil prices expected to weigh down consumption and investment.

Image :Courtesy: BS

• Issues :
  • The Ukraine war will serve to reduce global economic growth, it will also add to inflation. 
  • Elevated price pressure will complicate the trade-offs central banks face between curbing inflation and protecting growth. 
  • As key central banks tighten policy, interest rates are set to rise, exerting pressure on emerging markets and developing economies. 
  • Higher food and fuel prices were impacting vulnerable populations, and interest rates were rising, as central banks tightened monetary policy.
  • Additionally, the global economy was becoming fragmented with countries cutting off ties with Russia,  the “rules-based frameworks” were being threatened, and pandemic-induced lockdowns in China were exacerbating supply-chain disruptions.
• Suggestions 
  • Multilateral efforts to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, manage debt distress, tackle climate change, and end the pandemic are essential.
  • Interestingly, the IMF pitched for carbon pricing and fossil fuel subsidy reform, which could also help with the transition to a cleaner mode of production, less exposed to fossil fuel prices. 
  • This is “more important than ever in light of the fallout of the war on the global energy market”.
  • Authorities should also be vigilant about private sector vulnerabilities to rising interest rates.

Source:TH