Relevance: Prelims: International Institutions and Indexes
Context: IMF released the World Economic Outlook (WEO) 2020
What Is World Economic Outlook (WEO)?
The World Economic Outlook (WEO) is a report by the International Monetary Fund that analyzes key parts of the IMF’s surveillance of economic developments and policies in its member countries. It also projects developments in the global financial markets and economic systems.
The WEO is usually prepared twice a year and is used in meetings of the International Monetary and Financial Committee.
KEY TAKEAWAYS
- The World Economic Outlook (WEO) is an IMF report that provides analysis and forecasts of economic developments and policies in its member countries.
- The report encapsulates state of the global economy and highlights risks and uncertainty that threaten growth.
Understanding World Economic Outlook (WEO)
The World Economic Outlook (WEO) presents the IMF’s analysis and projections of global economic developments and classifies their analysis by region and stage of economic development. This report is the main instrument of disseminating the findings and analysis of their global surveillance activities to the world.
INDIAN CONTEXT
The International Monetary Fund has slashed its estimate on India’s 2019 economic growth to 4.8% from the 6.1% expansion it projected in October, citing a sharper-than-expected slowdown in local demand and stress in the non-bank financial sector.
The steep cut in India’s growth rate has weighed on IMF’s projection on the world economy, which it now expects to have expanded 2.9% in 2019 compared with the previous forecast of 3.0%.
The IMF’s World Economic Outlook (WEO) Update revised India’s 2020 growth forecast to 5.8%, down 0.9 percentage point from the previous estimate. For 2021, the estimate is 6.5%.
The markdown has been the highest for India in the latest WEO projections.
The report cited monetary and fiscal stimulus, along with its expectation of subdued oil prices, for the projected improvement in India’s growth this year and the next.
GLOBAL SCENARIO
Globally, growth is expected to accelerate to 3.3% in 2020 from 2.9% in 2019 and further to 3.4% in 2021. The IMF has trimmed its estimate on the world economy by 0.1 point each for 2019 and 2020 and by 0.2 percentage point for 2021 from the earlier forecasts.
The WEO estimates China to have grown 6.1% in 2019. For the current year, the forecast is for 6% growth.
For the emerging markets, the report cautioned that improvement from reform efforts could fail to materialise in the face of intensifying social unrest that reflect the erosion of trust in established institutions and lack of representation in governance structures.
In terms of policy, the report suggested governments to enhance inclusiveness and build governance structures that strengthen social cohesion and ensure adequate safety nets to protect the vulnerable.
The government has over the past few months taken several steps to lift growth, including a cut in corporate tax rates, a real estate fund for stressed housing projects and a national infrastructure pipeline. It is expected to announce another set of measures to arrest the slowdown in the upcoming budget, to be presented on February 1.
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