World Economic Outlook Report : IMF

World Economic Outlook is a report published by the International Monetary Fund twice a year. The analyses entailing global economic development is shared in this report. The report is important for the IAS Exam preparation, as recently due to the war in Ukraine, the world economy has been severely affected and the World Economic Report 2021 reflected upon the economic growth projections going forward.

Aspirants can read about the International Monetary Fund (IMF) in the linked article.

World Economic Outlook Report 2021

Global economic prospects have worsened significantly since our last World Economic Outlook forecast in January. At the time, we had projected the global recovery to strengthen from the second quarter of this year after a short-lived impact of the Omicron variant. Since then, the outlook has deteriorated, largely because of Russia’s invasion of Ukraine causing a tragic humanitarian crisis in Eastern Europe and the sanctions aimed at pressuring Russia to end hostilities. The key findings of the World Economic Outlook in October 2021 are

Global growth

  • Economic damage because of the Russia-Ukraine conflict will contribute to a significant slowdown in global growth in 2022. 
  • Even as the war reduces growth, it will add to inflation. Fuel and food prices have increased rapidly, with vulnerable populations, particularly in low-income countries.
  • Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than in the January World Economic Outlook Update. 
  • Beyond 2023, global growth is forecast to decline to about 3.3% over the medium term. 
  • The global supply of several commodities decreases in this scenario. As a result, oil prices increase by 10% in 2022 and 15% in 2023, while metal prices increase by 5% in 2022 and 7.5% in 2023
  • Shortages of several commodities lead to additional disruption of supply chains, most notably in Europe, and add to the impact on inflation and activity. The combination of supply disruptions and higher energy prices in Europe, and Asia to a lesser extent, leads to weakened confidence, further dampening activity in those regions.

Inflation

  • Inflation is expected to remain elevated for longer than in the previous forecast, driven by war-induced commodity price increases and broadening price pressures. 
  • For 2022, inflation is projected at 5.7% in advanced economies and 8.7% in emerging market and developing economies 1.8 and 2.8 percentage points higher than projected in January.
  •  In some advanced economies, including the United States and some European countries, it has reached its highest level in more than 40 years, in the context of tight labour markets.

World Economic Outlook and Global Growth Projections 2021-22

The growth projections of a few advanced economies and emerging and developing economies, as mentioned by IMF’s WEO are given in the table below:

World Economic Outlook 2021 Projections
Advanced Economies Growth Rate
USA 5.7
Germany 2.8
France 7.0
Italy 6.6
Japan 1.6
World Economic Outlook 2021 Projections
Emerging Markets & Developing Economies Growth Rate 
India 8.9
China 8.1
Russia 4.7
ASEAN-5 3.4
Saudi Arabia 3.2

World Economic Outlook Report 2020

The IMF published the recent edition of the World Economic Outlook in October 2020 after the earlier release in April 2020. Both the reports mostly focused on the impact of coronavirus-led economic slowdown and future growth prospects.

Get all important reports published by international organizations in the linked article. 

COVID-19 & World Economic Outlook Projections

The key findings of the World Economic Outlook in October 2020 are:

  1. A deep recession in 2020 – The report mentioned a projection of less severe yet deep recession in the year 2020 due to the slowdown in economic activities across the globe due to lockdown.
  2. The key factors that led to rapid recovery in the economy and avoided a financial catastrophe are:
    • Sizable, swift, and unprecedented fiscal, monetary, and regulatory responses.
    • Maintenance of disposable income for households
    • Protection of cash flows for firms
    • Support of credit provisions
  3. The report suggests that emerging markets and developing economies are still unsecured due to the following reasons:
    • The pandemic continues to spread in these areas
    • The health systems in these areas are being overwhelmed with the rising number of cases.
    • Sectors like tourism are severely affected which are important in the growth of the economy.
    • Emerging markets and developing countries are also dependent on external finance including remittances.
  4. Due to covid-19 crisis, there has been a disruption in both supply and demand in the global economy.
  5. Some of the reasons for supply disruptions are:
    • Infections following coronavirus
    • Reduction in labour supply
    • Lockdowns
    • Business closures
    • Social distancing
  6. Some of the reasons for demand disruptions are:
    • Layoffs
    • Loss of income arising from unemployment, the morbidity of quarantines.
  7. The report also mentions that around 90 million people are expected to fall into extreme deprivation in 2020.
  8. Global Growth is projected at -4.4 percent (against an earlier projection of -5.2 percent.)
  9. The growth projection in 2021 is 5.2 percent.
  10. The report also predicted that the output in advanced and emerging economies will remain below 2019 levels, with an exception of China.
  11. Manufacturing-led economies recover better than the economies that rely on contact-intensive services and oil export.
  12. Uneven recoveries between advanced economies and developing economies are projected in 2020.
  13. The report also mentions the severe setback to the improvements in standards of living. It states, “The cumulative loss in output relative to the pre-pandemic projected path is projected to grow from 11 trillion over 2020-21 to 28 trillion over 2020-25.”

Daily News
Proposals of World Economic Outlook Report 2020

The World Economic Outlook report called for multiple ways to strengthen the economy amid an economic slowdown. It proposed the following actions:

  1. Greater International Collaboration – The need for countries to work together in the time of pandemic can help in faster economic growth.
  2. The need to limit persistent economic damage – It proposed the governments should continue income support through targeted cash transfers, wage subsidies, and unemployment insurance.
  3. Design of policies that promote strong, sustainable and equitable economic growth.

World Economic Outlook Report 2020 & India

The important points to be noted w.r.t India’s economic growth as predicted by the IMF’s World Economic Outlook Report are:

  1. Industrial production in India has been severely hit amid economic slowdown followed by the COVID-19 crisis.
  2. The IMF’s World Economic Report of October 2020 mentions that India will be worst affected in both the short and long term.
  3. IMF’s WEO proposed that Bangladesh’s per capita income is expected to be higher than India’s in 2020.
  4. It projected the growth rate of 8.8 percent in 2021. The IMF stated, “The economy is projected to contract by 10.3 per cent in 2020.”

World Economic Outlook and Global Growth Projections 2020-21

The growth projections of a few advanced economies and emerging and developing economies, as mentioned by IMF’s WEO are given in the table below:

World Economic Outlook – October 2020 Projections

Advanced Economies Growth Rate (Red GDP, Annual %) – 2020
USA -4.3
Germany -6.0
France -9.8
Italy -10.6
Japan -5.3
World Economic Outlook – October 2020 Projections
Emerging Markets & Developing Economies Growth Rate (Red GDP, Annual %) – 2020
India -10.3
China 1.9
Russia -4.1
ASEAN-5 -3.4
Saudi Arabia -5.4

Aspirants should note down the estimates proposed by the international organisations as these are helpful for UPSC Mains answer writings. The IMF’s World Economic Outlook report findings can be useful for UPSC Mains GS 2, GS 3 and essay papers.

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