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IMF’s World Economic Outlook Report 2024 Highlights on Global Economy

Context: The International Monetary Fund (IMF) recently revised India’s growth projection upwards to 6.8% for 2024, citing robust domestic demand conditions and a growing working-age population.

India’s Growth Projection as per IMF’s World Economic Outlook

  • IMF’s Revised Forecast: The IMF raised India’s growth projection to 6.8% for 2024, up from its previous estimate of 6.5% in January.
  • Continued Growth Momentum: India’s growth trajectory remains strong, driven by robust domestic demand and a rising working-age population.
  • Comparison with China: India outpaces China, with the latter’s growth projected at 4.6% for the same period.
  • Inflation was projected to be 4.6% this year and 4.2% next year.

Global Economic Trends

  • Emerging and Developing Asia: Growth in this region is expected to decline slightly from 5.6% in 2023 to 5.2% in 2024 and 4.9% in 2025, with a modest upward revision compared to previous estimates.
  • China’s Slowdown: China’s growth is projected to slow from 5.2% in 2023 to 4.6% in 2024 and 4.1% in 2025, attributed to factors such as easing post-pandemic consumption and weaknesses in the property sector.

IMF's World Economic Outlook Report 2024 Highlights_4.1

About International Monetary Funds (IMF)

  • Establishment: The IMF was created in 1944 following the Bretton Woods Agreement.
  • Primary goal: To bring about international economic coordination to prevent competing currency devaluation by countries trying to promote their own exports.
    • Eventually, it evolved to be a lender of last resort to governments of countries that had to deal with severe currency crises.
  • Membership: It has 190 member countries.
  • Headquarter: Washington, D.C., USA.
  • Functions:
    • International Cooperation: The IMF promotes global monetary stability and collaboration to prevent financial crises.
    • Financial Aid: It offers loans and financial support to members facing economic challenges, often with conditions to improve economic health.
    • Economic Surveillance: The IMF monitors economic developments and advises on policies for stability and growth.
    • Technical Assistance: It provides expertise and training in fiscal and monetary policy, as well as financial regulation.
    • Research and Analysis: The IMF researches various economic issues, including global economic trends and poverty reduction.
  • Reports by IMF:
    • Global Financial Stability Report.
    • World Economic Outlook.
      • It is usually published twice a year in April and October.

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IMF World Economic Outlook Report

  • Published biannually by the IMF.
  • Publication Schedule: April and October for comprehensive reports, followed by less detailed updates in July and January.
  • Data Provided: Includes information on member countries’ output, inflation, employment, fiscal balances, and debt statistics.
  • It summarises the state of the world economy and significant recent developments.

Key Highlights of Recent World Economic Outlook Report

  • Reserve Bank of India’s Estimate: The IMF’s estimate is lower than the Reserve Bank of India’s prediction of a 7% growth rate for FY24.
  • FY25 Projection: The IMF also raised the growth projection for FY25 to 6.5% from the earlier 6.1%.
  • IMF’s Medium-Term GDP Growth: The IMF has revised India’s medium-term (potential) GDP growth to 6.5% due to strong public investment, favourable labour market outcomes as seen in the latest PLFS report, and adjustments to the model.
  • India’s economy is expected to reach the $5-trillion mark by 2027-28, and subsequently become the third-largest economy in the world.
  • IMF Global Forecast: The IMF expects the global economy to grow by 3.1% in 2023, now projecting higher growth than its previous forecast, despite facing inflationary pressures, policy tightening, and turbulent markets.
    • The IMF predicts the US economy to grow at 2.1% in 2024, which is higher than the earlier forecast.

IMF’s Outlook for Global Economy

  • Steady Growth: Global growth, estimated at 3.2% in 2023, is projected to continue at the same pace in 2024 and 2025.
  • Resilience Amid Challenges: Despite challenges such as supply chain disruptions and the Russia-Ukraine conflict, the global economy has shown resilience, with steady growth and declining inflation.
  • Prioritizing Economic Resilience: Policymakers are urged to focus on strengthening government finances and revitalizing economic growth prospects to enhance economic resilience.

Chief Economist’s Insights

  • Economic Resilience: Pierre-Olivier Gourinchas, the IMF’s chief economist, emphasizes the global economy’s resilience, with growth bottoming out in 2022 and inflation slowing.
  • Reduced Economic Scarring: While the US economy has surpassed its pre-pandemic trend, low-income developing countries may experience more economic scarring.
  • Challenges in China: China’s economy grapples with challenges in its property sector, necessitating measures to boost domestic demand and address trade imbalances.

Previous Year Prelims Question

Q. “Gold Tranche” (Reserve Tranche) refers to (2020)

(a) a loan system of the World Bank
(b) one of the operations of a Central Bank
(c) a credit system granted by WTO to its members
(d) a credit system granted by IMF to its members

Ans: (d)

Q. ‘Global Financial Stability Report’ is prepared by the (2016)

(a) European Central Bank
(b) International Monetary Fund
(c) International Bank for Reconstruction and Development
(d) Organization for Economic Cooperation and Development

Ans: (b)

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