International Monetary Fund (IMF) has released its Regional Economic Outlook for Asia And Pacific Report April 2024, which stated that India was the source of repeated positive growth surprises, supported by resilient domestic demand. Also, Public Investment is a significant factor in driving India’s economy.
Key Highlights of the Report
- Growth in Asia-Pacific: Asia-Pacific’s growth in late 2023 surpassed expectations at 5.0%, with varying inflation rates across economies.Projections for 2024 suggest a slight growth slowdown to 4.5%, balancing near-term risks.In emerging markets, growth was supported primarily by strong private demand.
- India’s Growth Forecasts: It raised India’s growth forecast for the financial year 2024-25 to 6.8% from 6.5% earlier and retained the growth forecast for 2025-26 at 6.5%.It stated that India and the Philippines have been the source of repeated positive growth surprises, supported by resilient domestic demand.In China and, especially, India, public investment made an important contribution.
- Forecast for China: The Chinese Economy is expected to grow at the rate of 4.6% in 2024, slower from 5.2% in 2023 and expected to remain at 4.1% in 2025.The IMF sees China as a source of both upside and downside risks.Policies addressing stresses in the property sector and boosting domestic demand will benefit China and the region, as this sector is under stress due to concerns about a potential housing bubble (rapid rise in prices) and high levels of debt.However, sectoral policies leading to excess capacity in certain industries, such as steel and aluminium, will harm China and the region.
- Inflation Forecast: The IMF stated that inflation is currently at or near the desired level in emerging markets, but there are different factors contributing to inflation in the future.Core inflation is expected to stay low, but some economies may see a decrease in headline inflation due to lower energy prices.However, in countries like India, food prices, particularly for rice, can increase headline inflation.Inflation, as defined by the International Monetary Fund, is the rate of increase in prices over a given period, encompassing a broad measure of overall price increases or for specific goods and services.
- Headline Inflation: It considers the price changes of all the goods and services. This basket includes everything from food and energy to clothing, rent, and entertainment.Core Inflation: This is change in price of goods and services excluding food and energy sectors(as they are volatile).Core Inflation= Headline Inflation- Food and Fuel Items
- Geoeconomic Fragmentation: IMF has highlighted Geoeconomic fragmentation as a significant risk.Geoeconomic fragmentation refers to the risk of increasing economic and trade tensions between countries, which can have negative impacts on global economic growth and stability.Global disputes increase the trade risks, as shown by ships being redirected around Africa to bypass the Red Sea, leading to higher shipping expenses.IMF suggested that policymakers should be cautious to not aggravate trade frictions themselves.
IMF
- The International Monetary Fund (IMF) is an international organisation that provides financial assistance and advice to member countries.
- It was conceived during the Bretton Woods Conference in July 1944.
Objectives
- Foster global monetary cooperation and stability.
- Ensure financial stability and provide crisis assistance.
- Facilitate international trade with stable currencies.
- Promote sustainable growth and employment through effective policies.