The International Monetary Fund (IMF) on Tuesday,19 April, slashed India's growth rate to 8.2 percent for 2022-23, compared to 9 percent in its January forecast. It also reduced its forecast for global economic growth for 2022 to 3.6 percent, a reduction by 0.8 percent as compared to its earlier forecast, citing the war in Ukraine as the primary reason.
The global body also slashed India's growth forecast for 2023-24 to 6.9 percent compared to 7.1 percent in its January report. The global growth forecast for 2023 was reduced to 3.6 percent from 3.8 percent estimated earlier.
The IMF's "World Economic Outlook" stated that the war in Ukraine is expected to reduce growth and further increase inflation, leading to risks of "social unrest". However, it said that the forecast was subjected to "unusually high uncertainty".
The IMF stated that the prolongation of the war in Ukraine, sanctions imposed on Russian energy supplies, deceleration of China's economy and an increase in COVID-19 cases globally were contributing to the slowing of global growth.
War Will Trigger Greater Supply Shocks: IMF
Global growth over the medium-term is also expected to decline to 3.3 percent, as compared to 4.1 percent experienced from 2004-13, and 6.1 percent last year.
It was already expected that the economies of Russia and Ukraine would decelerate sharply, owing to spillovers for countries of the European Union (EU), that are dependent on Russian energy supplies, and are expected to see their 2022 growth rate slashed by 1.1 percent.
"The war adds to the series of supply shocks that have struck the global economy in recent years. Like seismic waves, its effects will propagate far and wide — through commodity markets, trade, and financial linkages," said the IMF's chief economist Pierre-Olivier Gourinchas, as per a report by Reuters.
'Economic Gulf Between Advanced and Developing Countries to Persist'
The IMF also said that advanced economies would take a longer period of time to reach their pre-pandemic levels of output, adding that the gulf between the growth levels of advanced and developing countries would persist.
The financial body forecasted inflation of 5.7 percent in advanced countries and 8.7 percent in developing countries — a rise of 1.8 and 2.8 percent as compared to its forecast in January this year.
"Inflation has become a clear and present danger for many countries," Gourinchas said, adding that the United States (US) Federal Reserve and other central banks had tightened monetary policy in this regard.
The war in Ukraine had also led to increased risks of permanently fragmentising the global economy into different blocks with separate standards of technology, payments mechanisms, and currency reserves, as per a report by Reuters.
Gourinchas said that such a "tectonic shift" would cause long-run efficiency losses, increase volatility and represent a major challenge to the rules-based framework that has governed international and economic relations for the last 75 years.
(With inputs from Reuters.)
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