IMF heralds a new era of growth driven by China and India’s impact on global economy
The International Monetary Fund (IMF) declared a change in the world economy and improved its growth outlook. The recent World Economic Outlook upgrade raised the global growth prediction for 2023 to 2.9% due to steady spending in the US and the revival of China’s economy. The fund diminished its expectations for the Middle East and North Africa (MENA) region to 3.2% in 2023 from the previous prediction of 3.6%. The IMF stated that even though the world economy is expected to slow down this year, it will bounce back in 2024 and a global recession is not in their present projections.
According to the IMF, India is expected to maintain its growth rate above 6.0% in 2023 and 2024 while China’s growth is anticipated to surpass 5.0% this year. Both India and China will contribute to 50% of the world’s growth in 2023. Despite external challenges, India’s growth rate is projected to dip from 6.8% in 2022 to 6.1% in 2023 but then recover to 6.8% in 2024 due to strong domestic demand. As a result, India will remain the fastest-growing major economy in 2023 and 2024.
The global growth rate is estimated to be 3.4% in 2022 and the MENA region is predicted to grow at 5.4% in 2022. The IMF’s decreased growth projection for the MENA region in 2023 is due to a sharper growth slowdown in Saudi Arabia, primarily influenced by a global slowdown caused by rising interest rates and the conflict in Ukraine. Saudi Arabia’s growth rate is expected to significantly drop from 8.7% in 2022 to 2.6% in 2023 mainly due to a decrease in oil production.
The IMF previously predicted a growth rate above 6% for the United Arab Emirates (UAE) in 2022, which is higher than its previous forecast and a substantial increase from a 3.8% growth in 2021. The IMF declared that the economic outlook for the UAE remains positive, backed by domestic activities and the predicted non-hydrocarbon growth of around 4% in 2023.
P Gourinchas stated that the world economy has demonstrated exceptional resilience and is expected to continue to do so in 2023. With tight labor markets, strong household spending, business investment, and European economies resisting the energy crisis, global headline inflation is expected to drop from 8.8% in 2022 to 4.3% in 2024. The IMF warns of potential risks such as a slowdown in China’s recovery, which could have spillover effects on the rest of the world, and the escalation of the conflict in Ukraine and sudden repricing in financial markets, which are major risks to the world economy. On the positive side, strong household balance sheets, tight labor markets, and robust wage growth could help sustain private demand and allow for a soft landing with less monetary tightening.