World Economic Outlook; International Monetary Fund (IMF)

IMF’s 2021 World Economic Outlook (WEO) projected Global prospects remain highly uncertain one year into the pandemic.

Report Summary

• Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022.
• Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support.
• The outlook depends not just on the outcome of the battle between the virus and vaccines—it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis.
• The contraction for 2020 is 1.1% points smaller than the previous projection, reflecting.
  • Higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working.
  • Additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year.

India- specific observations in its January 2021 report

• IMF revised its earlier forecast of an 11.5 percent expansion in the Indian economy to 12.5%growth in FY22.
• As per IMF ‘India will emerge as the only key nation to record double-digit growth and reclaim the status of the world’s fastest-growing major economy. India is the only country expected to register double-digit growth this fiscal.
• India retains its rank as the world’s fastest-growing major economy, tying with China. China was the only major economy to have a positive growth rate of 2.3% in 2020 and is expected to grow by 8.6% in 2021 and 5.6% in 2022.

What the World could do to revive its growth?

• The emphasis should be on escaping the health crisis by prioritizing health care spending.
• Monetary policy should remain accommodative (where inflation is well behaved), while proactively addressing financial stability risks using macroprudential tools.
• Policymakers will need to continue supporting their economies while dealing with more limited policy space and higher debt levels than prior to the pandemic.
• The priorities should include green infrastructure investment to help mitigate climate change, digital infrastructure investment to boost production capacity, and strengthening social assistance to arrest rising inequality.