The IMF forecasted an ambitious 12.5% growth rate for India in 2021, higher than China, the only major economy with a positive growth rate last year during the COVID-19 pandemic. In its annual World Economic Outlook, released ahead of the World Bank’s annual spring meeting, the Washington-based global financial institution predicted that the Indian economy will expand by 6.9 % in 2022.
Notably, India’s economy contracted by a record 8% in 2020, according to the International Monetary Fund (IMF), which forecasted an ambitious 12.5 % growth rate for the country in 2021. China, on the other hand, is forecasted to rise by 8.6 % in 2021 and 5.6 % in 2022, despite being the only global economy to have a positive growth rate of 2.3 % in 2020. “In comparison to our previous estimate, we are now expecting a stronger rebound for the global economy in 2021 and 2022, with growth expected to be 6% in 2021 and 4.4% in 2022”, Gita Gopinath, Chief Economist at the IMF, said. The global economy contracted by 3.3 % in 2020. “However, the outlook poses challenging challenges due to divergences in the pace of recovery both across and within countries, as well as the potential for long-term economic harm from the crisis,” she wrote in the report’s foreword.
According to the report, after a 3.3% contraction in 2020, the global economy is expected to expand at a rate of 6% in 2021, before slowing to 4.4% in 2022. The contraction for 2020 is 1.1 percentage points lower than predicted in the October 2020 World Economic Outlook (WEO), indicating higher-than-expected growth outturns in most regions in the second half of the year, after lockdowns were eased and economies adapted to new ways of working.
The predictions for 2021 and 2022 are 0.8% points and 0.2% points, higher than in the October 2020 WEO, respectively, indicating additional fiscal support in a few major economies and the expected vaccine-powered recovery in the second half of the year, according to the study.
Over the medium term, global growth is expected to slow to 3.3%, reflecting projected harm to supply capacity and factors that predate the pandemic, such as aging-related slower labour force growth in advanced economies and some emerging market economies. Recoveries are also diverging dangerously across and within countries, Gopinath said, as economies with slower vaccine rollout, less policy support, and a reliance on tourism do worse.
According to Gopinath, policymakers would need to continue supporting their economies, despite having less policy room and higher debt levels than before the pandemic. This necessitates more tailored interventions to allow for longer-term assistance if necessary. With multi-speed recoveries, she believes that a customised strategy is needed, with policies geared to the stage of the pandemic, the intensity of the economic recovery, and the structural characteristics of individual countries.
“Right now, the priority should be on averting the health crisis by prioritising health-care spending on vaccines, medications, and facilities. Fiscal assistance should be well tailored to impacted households and businesses. “Monetary policy should remain accommodative (where inflation is well behaved) while effectively addressing financial stability risks with macro prudential tools,” Gopinath added.
If the health crisis is over, policy efforts will turn to building more stable, inclusive, and greener economies, both, to sustain the recovery and to improve potential production, according to Gopinath. “Green infrastructure investment should be prioritised to help offset climate change, digital infrastructure investment should be prioritised to improve productive capacity, and social assistance should be strengthened to combat increasing inequality,” she added.
Last year, the global economy shrank by 4.3%, more than two-and-a-half times more than during the global financial crisis of 2009. Since it first emerged in central China’s Wuhan city in 2019, the COVID-19 virus has infected 131,707,267 people and killed 2,859,868 people worldwide, according to Johns Hopkins University’s coronavirus tracker.
