World Economic Outlook (Update)

WORLD ECONOMIC OUTLOOK (WEO) UPDATE

Question: What was the projected growth rate of India for the year 2016 in the “World Economic Outlook (Update) report published on January 19, 2016?

(a) 7.5%
(b) 7.3%
(c) 7.0%
(d) 7.2%

Ans (a)

Related facts:

  • On January 2016, the International Monetary Fund (IMF) published the updated version of World Economic Outlook.
  • The theme of this version is “Subdued Demand, Diminished Prospects”
  • In this estimated global growth in 2015 was estimated at 3.1 percent now it updated to 3.4 percent for 2016 and 3.6 per cent for 2017.
  • IMF forecast for global growth in 2016 to 2017 is revised down by 0.2 percentage points compared to the estimated projections made earlier.
  • In this report, India’s growth rate in 2015 is estimated to 7.3 percent and for 2016 and 2017 projection is of 7.5 percent.
  • India’s growth rate is equal to the estimated projections made in October 2015.
  • Among BRICS countries the highest growth rate was of India (7.3%) was followed by China (6.9%), South Africa (1.3%), Russia (-3.7%) and Brazil (-3.8%), respectively.
  • Indian economy is expected to grow faster than other major emerging economies.
  • The International Monetary Fund projected India’s growth rate as 7.5 percent compared to 6.3 percent growth rate of China in year 2016.
  • Growth rate of advanced economies is estimated at 1.9 percent and 2.1 percent in 2016 and 2017 respectively.
  • The growth rate for the United States is estimated to be 2.5 for 2015 and 2.6 percent for the year 2016 and 2017.
  • Emerging market and developing economies (EMDE) growth rate in 2015 is estimated 4.0 percent and forecasted to 4.3 percent in 2016 and 4.7 percent in 2017.
  • In the report gross world trade (goods and services) compared to 2014 (3.4 percent) it has reduced in 2015 (2.6 percent). Also in 2016 (3.4 percent) and in 2017 (4.1 percent) is expected to grow.
  • Excessive reduction in the price of petroleum in 2015 (-47.1 percent) was assessed while some improvement is expected in 2016 and 2017.
  • The following three key transitions continue to influence the global outlook:

I. The gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing toward consumption and services.
II. Lower prices for energy and other commodities, and
III. A gradual tightening in monetary policy in the United States in the context of a resilient U.S. recovery as several other major advanced economy central banks continue to ease monetary policy.

  • The following risks are described in the report: –

I. A sharper-than-expected slowdown along China’s needed transition to more balanced growth with attendant effects on global financial markets and currency valuations.
II. Adverse corporate balance sheet effects and funding challenges related to potential further dollar appreciation and tighter global financing conditions as the United States exits from extraordinarily accommodative monetary policy.
III. A sudden rise in global risk aversion, regardless of the trigger, leading to sharp further depreciations.
IV. An escalation of ongoing geopolitical tensions in a number of regions affecting confidence and disrupting global trade, financial, and tourism flows.

  • In this report it is stated that to overcome the risks there is need of raising actual and potential output through a mix of demand support and structural reforms.

Reference:

http://www.imf.org/external/pubs/ft/weo/2016/update/01/

http://www.imf.org/external/pubs/ft/weo/2016/update/01/pdf/0116.pdf