IMF upgrades outlook for rich nations, slashes India forecast

On Jul 27, 2021

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Washington, July 27

The International Monetary Fund (IMF) on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the US and other wealthy economies but cutting estimates for a number of developing countries struggling with surging Covid infections.

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Renewed waves of covid to blame

Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of Covid cases in some countries, notably India, have led to downgrades. — Gita Gopinath, Chief Economist, IMF

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The divergence is based largely on better access to Covid vaccines and continued fiscal support in advanced economies, while emerging markets face difficulties on both fronts, the IMF said in an update to its World Economic Outlook.

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“Close to 40% of the population in advanced economies has been fully vaccinated, compared with 11% in emerging market economies, and a tiny fraction in low-income developing countries,” IMF’s chief economist Gita Gopinath said.

The IMF significantly raised its forecasts for the US, which it now expects to grow at 7% in 2021 and 4.9% in 2022 — up 0.6 and 1.4 percentage points, respectively, from the forecasts in April. The projections assume the US Congress will approve President Joe Biden’s roughly $4 trillion in proposed infrastructure, education and family support spending largely as envisioned by the White House.

Positive spillovers from the US spending plans, along with expected progress in Covid vaccination rates, are boosting the IMF’s 2022 global growth forecast to 4.9%, up 0.5 percentage point from April.

The IMF cut its 2021 growth forecast for India, which has struggled with a massive wave of infections this year, by three percentage points to 9.5%. It also reduced its 2021 forecast for China by 0.3 percentage point, citing a scaling back of public investment and overall fiscal support. — Reuters

Pegs India’s GDP growth at 9.5%

The IMF on Tuesday cut its growth forecast for India to 9.5% for the fiscal year to March 31, 2022 as the onset of a severe second Covid wave cut into recovery momentum
This forecast is lower than the 12.5% growth in GDP that IMF had projected in April before the second wave took a grip
For 2022-23, it expects economic growth of 8.5%, larger than the 6.9% it had projected in April

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