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India seen growing by 11.5% in FY22; global outlook improves, says IMF in latest World Economic Outlook report

Updated : January 27, 2021 07:55 AM IST

In its latest World Economic Outlook update for January, the IMF forecast global growth for 2021 at 5.5 percent.

The race between COVID-19 and the vaccine, and the ability of policies to provide effective support until the recovery is firmly underway, will determine the path of global activity, the International Monetary Fund (IMF) said on Tuesday.

In its latest World Economic Outlook update for January, the IMF forecast global growth for 2021 at 5.5 percent, 0.3 percentage points higher than its October forecast. It then expects global growth to moderate to 4.2 percent in 2022.

“The upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in economies such as the United States and Japan and an expected increase in contact intensive activities as the health crisis wanes,” IMF said.

The positive effects, its report said, may be partially offset by a somewhat worse outlook for the very near term as measures to contain the spread of the virus dampen activity.

The projected growth recovery this year follows a severe collapse in 2020, which IMF estimates at -3.5 percent, 0.9 percentage point higher than projected in the October forecast, reflecting stronger-than-expected momentum in the second half of 2020, the report added.

In the upside scenario, the level of global output increases above baseline by roughly 0.75 percent in 2021, widening to almost 1 percent above baseline in 2022, IMF said. In the downside scenario, the report said, global activity falls below baseline by roughly 0.75 percent in 2021 but starts to return toward baseline in 2022.

“There is a great deal of uncertainty around this forecast. Greater success with vaccinations and therapeutics and additional policy support could improve outcomes, while slow vaccine rollout, virus mutations, and premature withdrawal of policy support can worsen outcomes. If downside risks were to materialize, a tightening of financial conditions could amplify the downturn at a time when public and corporate debt are at record highs worldwide,” IMF’s Chief Economist Gita Gopinath said.

“The strength of the projected recovery also varies significantly across countries, with large differences in projected output losses relative to the pre-COVID forecast,” Gopinath added.

India’s growth forecast for FY22 was revised significantly in IMF’s latest World Economic Outlook report. India’s economy is now seen growing by 11.5 percent in FY22, 270 bps higher than the October forecast, and by 6.8 percent in FY23, lower by 120 basis points compared to the October forecast. The upward revision in India’s FY22 forecast reflects carryover from a stronger-than-expected recovery in FY21, IMF said.

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