Washington, (Asian independent) The International Monetary Fund (IMF) on Tuesday forecast a “soft landing” for the global economy hammered in recent years by a deadly pandemic, skyrocketing inflation and high interest rates, and protracted wars.
It also upgraded the growth forecast for the India economy by 0.2 percentage points to 6.5 percent for both 2024 and 2025, citing resilient domestic demand.
The IMF, in a World Economic Outlook report, said that the global recovery from the Covid-19 pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis is “proving surprisingly resilient”.
Inflation is declining more rapidly than expected from its 2022 peak. At the same time, it added, high interest rates aimed at fighting inflation and a withdrawal of fiscal support amid high debt are expected to weigh on growth in 2024.
“With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced,” it said in the report titled “Moderating Inflation and Steady Growth Open Path to Soft Landing”.
“The clouds are beginning to part. The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up,” said the fund’s Chief Economist Pierre-Olivier Gourinchas in an accompanying blog.
“But the pace of expansion remains slow, and turbulence may lie ahead.
“Global activity proved resilient in the second half of last year, as demand and supply factors supported major economies. On the demand side, stronger private and government spending sustained activity, despite tight monetary conditions. On the supply side, increased labor force participation, mended supply chains and cheaper energy and commodity prices helped, despite renewed geopolitical uncertainties.”
The fund attributed the upbeat forecast to “greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China”.
One of these emerging markets is India.
“Growth in India is projected to remain strong at 6.5 per cent in both 2024 and 2025, with an upgrade from October of 0.2 percentage point for both years, reflecting resilience in domestic demand.”
China’s growth prospects have also been upgraded from the previous forecast by 0.4 percentage points to 4.6 per cent in 2024 but then, it dips to 4.1 per cent in 2025.
The 2024 upward revision is a “carryover from stronger-than- expected growth in 2023 and increased government spending on capacity building against natural disasters”, the fund said in the report.
