The International Monetary Fund (IMF) chief has said that India and China are expected to account for half of global economic growth in 2023. IMF managing director Kristalina Georgieva also said on Thursday that the world economy will grow at less than 3 per cent this year, with the slowdown expected to continue for a few more years in the wake of geo-political tensions including the Ukraine crisis.
“The period of slower economic activity will be prolonged, with the next five years witnessing less than 3 per cent growth, our lowest medium-term growth forecast since 1990, and well below the average of 3.8 per cent from the past two decades," she said.
After a strong recovery in 2021 came the severe shock of Russia's war in Ukraine and its wide-ranging consequences global growth in 2022 dropped by almost half, from 6.1 to 3.4 per cent, Georgieva said.
About 90 per cent of advanced economies are projected to see a decline in their growth rates this year, she said. Georgieva, however, expressed hope in emerging economies, especially in Asia. “India and China are expected to account for half of global growth in 2023. But others face a steeper climb,” she explained. The IMF chief warned that lower income nations will be adversely affected; poverty and hunger could further increase.
Earlier this week, the Asian Development Bank (ADB) had also predicted that Asia will witness strong economic growth—4.8 per cent in 2023 and 2024, higher than 4.2 per cent last year. In its latest growth outlook, the ADP attributed the growth to China relaxing its strict Covid-19 restrictions and a strong domestic demand in India.
Georgieva's comments come ahead of next week's spring meetings of the IMF and the World Bank, where policy-makers will convene to discuss the global economy's issues. The annual gathering will take place as central banks around the world continue to raise interest rates to tame galloping inflation rates. The Reserve Bank of India (RBI), in a surprising move on Thursday, kept the repo rate on hold after six consecutive hikes.
Georgieva said the global economy faced increased downside risks following recent bank failures in Switzerland and United States. She called on policymakers to carefully balance the fight against persistent inflation with managing risks in the financial sector.
- with agency inputs