World Economic Outlook Report 2021

In News

Recently, the IMF released a World Economic Outlook report that retained the global economic growth forecast of 6% for 2021.

World Economic Outlook

• 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 usually prepared twice a year and is used in meetings of the International Monetary and Financial Committee.
• 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.
• The World Economic Outlook database is created during the bi-annual WEO exercise, which begins in January and June of each year and results in the April and September/October WEO publication.

Key Findings

• For India
  • Growth decline from the expected forecast: 
    • The IMF cut its economic growth forecast for India from 12.5% to 9.5% for the fiscal year to March 31, 2022, as the onset of a severe second COVID-19 wave cut into recovery momentum.
  • Slow recovery:
    • Growth prospects in India have been downgraded following the severe second COVID wave during March-May and expected slow recovery in confidence from that setback
  • Vaccination penetration low:
    • Since India was lagging in vaccination, economic activities may be further affected in India. 
  • GDP decline projected by other organizations:
    • S&P Global Ratings projected a 9.5% GDP growth in the current fiscal and 7.8% in 2022-23.
    • World Bank sees GDP growth at 8.3% from April 2021 to March 2022
    • The Asian Development Bank (ADB) downgraded India’s economic growth forecast to 10% from 11% estimated in April.
    • Moody’s has projected India clocking 9.3% growth in the current fiscal ending March 2022. For the 2021 calendar year, Moody’s has cut the growth estimate sharply to 9.6%.
  • GDP in value:
    • The GDP, which shrank from $2.87 trillion in 2019-20 to $2.66 trillion in the following year, is estimated to reach around $4 trillion in 2024-25.
• Global Scenario
  • Vaccination Penetration Impact: 
    • In countries with high vaccination coverage, such as the United Kingdom and Canada, the impact would be mild; meanwhile, countries lagging in vaccination, such as India and Indonesia, would suffer the most among G20 economies.
    • Close to 40 per cent of the population in advanced economies has been fully vaccinated, compared with 11 per cent in emerging market economies, and a tiny fraction in low-income developing countries
  • Global economy to grow:
    • The global economy is projected to grow 6% in 2021 and 4.9% in 2022. 
    • The 2021 global growth forecast is unchanged from April 2021.
  • Widening Gap:
    • The global economic recovery continues, but with a widening gap between advanced economies and many emerging markets and developing economies.
  • Per capita loss:
    • The pandemic has reduced per capita incomes in advanced economies by 2.8%, relative to pre-pandemic trends over 2020-2022, compared with an annual per capita loss of 6.3% a year for emerging market and developing economies (excluding China).
  • Faster-than expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades.

Way Forward

• Provide better and faster access to vaccinations to overcome this fall in economic growth.
• Inclusive Monetary Policy should be worked upon so that businesses don’t face any more brunt of the situation
• Governments still need to follow the Welfare Model to support the economy during turbulent times.

Source: TH