Global Economic Outlook Current Affairs - 2019

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IMF: World Economic Outlook, 2019

The World Economic Outlook is a biennial report that is released in April and October. According the report released recently on October 15, 2019, the global economy is at its slowest pace of growth at 3%. This is a serious climb down from 3.8% in 2017.

Key highlights of the report

  • The Global growth rate is projected to improve to 3.4% by 2020.
  • The growth of advanced economies is projected to slow down by 1.7%
  • The emerging and developing economies are projected to experience a growth pick up from 3.9% in 2019 to 4.6% in 2020.
  • The report downgraded India’s growth projections to 6.1% in 2019 and 7% in 2020.
  • According to the report, China is projected to grow at 6.1% in 2019 and 5.8% in 2020.
  • The trade volume reached the lowest since 2012. It reduced by 1% since 2012.

Justifications

  • About half of the economic slow down comes from shallower recessions in stressed emerging markets like Argentina, Turkey, Iran
  • Higher tariffs and prolonged uncertainty in the trade policy are the major reasons for dented investment and the slowdown in the growth. This is very well seen in the effects of trade wars and imposed sanctions
  • The automobile industry is contracting mainly due to the disruptions from new standard emission standards. This predominantly has effect in China.
  • Trade barriers and geopolitical tensions like Brexit is hampering investment, confidence and growth

Recommendations

  • The countries should support the economy slow down with tax-base enhancing measures, rationalizing subsidy-spending, efficient credit allocation and governance of public sector banks.
  • India should keep its Fiscal Deficit under check

India’s GDP Forecasts by Fitch Ratings

In it’s Global Economic Outlook report, Fitch Ratings has cut India’s economic growth forecast for the next financial year 2019-20 starting from April 1 to 6.8 per cent from its previous estimate of 7 per cent, on the account of weaker than expected momentum in the economy.

GDP Forecasts

  • Even though Fitch Ratings has reduced the GDP forecasts for India, it sees Indian GDP growth to hold up reasonably well, at 6.8 per cent, followed by 7.1 per cent in 2021-22.
  • India’s GDP growth for the financial year 2019-20 was reduced to 7.2 per cent from 7.8 per cent earlier in December 2018.
  • Further, the growth forecasts for 2020-21 and 2021-22 was reduced to 7 per cent from 7.3 per cent and 7.1 per cent from 7.3 per cent, respectively.

Fitch Ratings observes that Reserve Bank of India (RBI) has adopted a more dovish monetary policy stance and cut interest rates by 0.25 percentage at its February 2019 and it expects another 25 bps cut in 2019, amid protracted below-target inflation and easier global monetary conditions than previously envisaged.

Fitch notes that benign oil price outlook and expectations of accelerating food prices in the coming months should support rural households’ income and consumption.