IMF blames India for global slowdown, lowers 2019 growth forecast to 4.8%

Gita Gopinath, IMF Chief Economist
The International Monetary Fund (IMF) lowered India’s economic growth forecast to 4.8 per cent for this fiscal year owing to the crisis in the non-banking financial sector and weak rural demand. It also cut the world’s growth estimate and blamed the slowdown in India for its move.

The IMF projection, 1.3 percentage points lower than its earlier estimates, is less than the 5 per cent projected by the official advance estimates. The IMF projected India’s economy to grow by 5.8 per cent next year, which is 1.2 percentage points less than its earlier forecast. It also forecast the economy to grow by 6.5 per cent in 2021-22 which is 0.9 percentage point lower than earlier projections.

The IMF estimated world economic growth at 1.9 per cent for 2019, 0.1 percentage point lower than its earlier forecast. Similarly, it projected the global economy to grow by 3.3 per cent in the current calendar year, 0.1 percentage point lower than its previous estimates, and 3.4 per cent in 2022, 0.2 percentage points below its earlier estimates.

“The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years,” the IMF said ahead of the start of the World Economic Forum annual summit in Davos.


IMF Chief Economist Gita Gopinath said in a blogpost that the biggest contributor to the revision of global economic growth was India, where growth slowed sharply owing to stress in the non-banking financial sector and weak rural income growth. She, however, said growth momentum should improve next year due to factors like positive impact of corporation tax rate reduction.

She said the pick-up in global growth for 2020 remains highly uncertain as it relies on improved growth outcomes for stressed economies like Argentina, Iran, and Turkey, and for under-performing emerging and developing economies such as Brazil, India, and Mexico.

IMF Managing Director Kristalina Georgieva said the reality is global growth remains sluggish even as she mentioned that monetary easing has helped to stabilise the global economy, adding roughly 0.5 per cent to global growth. However, she said that a more comprehensive solution would be needed if global growth slows again. “A coordinated fiscal response can boost growth,” she said while calling for a “spirit of cooperation”.

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