NEW YORK: The International Monetary Fund has upgraded its economic forecast for India to 2024, warning that growth will decelerate next year, with both India and China accounting for nearly half of global growth this year.
India – which the IMF previously called “the world’s fastest-growing major economy” – is expected to grow at 7% in 2024, up from an April estimate of 6.8%. This can be largely attributed to improved private consumption – especially in the country’s rural areas, the report said.
However, this is a big drop from the 8.2% growth projected in the fiscal year from April 2023 to March 2024. The financial agency said growth will continue to decline and reach 6.5% in 2025.
The world’s most populous country, which Goldman Sachs says will become the world’s second-largest economy by 2075, is attracting investors from tech giants Apple to Google as it works toward becoming a manufacturing superpower.
IMF Chief Economist Pierre-Olivier Gourinchas said. “Asia’s emerging market economies remain the main engines for the global economy. Growth in India and China has been revised upwards, and they account for nearly half of global growth. Yet the outlook for the next five years remains weak.”
Expectations for China
Talking about China, China’s economy is expected to grow by 5% this year, which is in line with the IMF’s May forecast. The IMF said on Tuesday that this is higher than the 4.6% forecast in April, but lower than the 5.2% expansion in 2023.
According to the IMF’s latest World Economic Outlook in July, GDP in the world’s second-largest economy will slow further to 4.5% in 2025, and slide to 3.3% by 2029. Gourinchas said the improved forecast for 2024 was partly due to strong consumer activity and exports in the first quarter of the year.
“The Chinese economy has grown enormously over the last 15-20 years, and it is much less dependent overall on the external sector for its growth than it was perhaps 15 years ago or 20 years ago,” he said at a press briefing. “The fact that China is big also means it has a big influence on the rest of the world.”
Ahead of the IMF report on Tuesday, official data from China showed its economy grew 4.7% year-on-year in the second quarter – lower than the 5.1% growth expected by economists polled by Reuters.
Growth in Europe, US
The IMF said global growth is expected to rise to 3.2% in 2024 – unchanged from its April forecast, and rise slightly to 3.3% in 2025. The US economy is projected to grow by 2.6% this year compared to 2023, slightly below its 2.7% forecast in April. The inflation rate for the world’s largest economy is easing, and fell to 3% in June from 3.3% in May.
Federal Reserve Chairman Jerome Powell said on Monday that the central bank will not wait for inflation to reach 2% to cut interest rates, saying a “hard landing” for the economy is unlikely. He said it looks like inflation dynamics, at least in the US, are moving in the right direction.
At the same time, growth in the euro zone for this year has been raised to 0.9% – 0.1 percentage point higher than April estimates, driven by strong momentum in services and higher-than-expected net exports in the first half of 2024. Growth in the region is projected to accelerate to 1.5% in 2025 due to rising real wages and more investment, the IMF said.
Petya Kova Brooks, deputy director in the IMF’s research department, said, “Spain is a bright spot in the euro area in terms of revisions. We have raised the forecast for this year to 2.4%. A large part of that revision was due to the results we saw in the first quarter of this year, where there was very strong services, exports, as well as investment growth.”