IMF retains India growth forecasts, sees persistent supply disruption

Informist, Tuesday, Oct 12, 2021


–IMF leaves India FY22 GDP growth forecast unchanged at 9.5%

–IMF leaves India FY23 GDP growth forecast unchanged at 8.5%

–IMF cuts global GDP growth forecast for 2021 by 10 bps to 5.9%

–IMF leaves global GDP growth forecast for 2022 unchanged at 4.9%

–IMF cuts US GDP growth forecast for 2021 by 100 bps to 6.0%

–IMF raises US GDP growth forecast for 2022 by 30 bps to 5.2%

–IMF cuts China GDP growth forecast for 2021 by 10 bps to 8.0%

–IMF cuts China GDP growth forecast for 2022 by 10 bps to 5.6%

–IMF: Global recovery continues, but momentum weakened

–Outlook for global inflation "highly uncertain"

–Supply disruptions could become persistent

–Global inflation seen reverting to pre-COVID levels mid-2022

–Unlikely inflation expectations will get de-anchored

–Inflation unlikely to persistently exceed central bk targets


NEW DELHI – The International Monetary Fund has retained its GDP growth forecasts for India at 9.5% and 8.5% for this and the next year, respectively.


The organisation's growth forecast for India for 2021-22 (Apr-Mar) matches that of the Reserve Bank of India.


After several sharp upward and downward revisions to the growth forecast in the last year and a half, the IMF's latest update to its World Economic Outlook report largely made minor changes. The global growth forecast for 2021 was lowered by 10 basis points to 5.9% and was retained at 4.9% for 2022.


However, the US economy is now seen growing a full percentage point slower in 2021 at 6.0% because of large inventory drawdowns following supply disruptions and softening of consumption. The forecast for 2022 was raised by 30 bps to 5.2%.


The GDP growth forecast for China was cut by 10 bps each for both 2021 and 2022 to 8.0% and 5.6%, respectively.


But more than growth, the IMF focused on inflation in its report, with shortages of key components creating havoc in industrial supply lines.


"Pandemic-induced supply-demand mismatches could persist longer than expected, leading to sustained price pressures and rising inflation expectations," the IMF said, adding that the outlook for inflation is "highly uncertain".


However, the IMF does not expect high inflation to pose a long-term threat, saying that it should return to pre-pandemic levels by the middle of 2022.


"Rising commodity prices and supply chain bottlenecks are putting upward pressure on headline inflation rates. Moreover, the unprecedented nature of the current recovery has raised questions about how long supply will take to catch up with accelerating demand," the IMF said.


"These uncertainties are fuelling worries that inflation could persistently overshoot central bank targets and de-anchor expectations, leading to a self-fulfilling inflation spiral. The analysis in this chapter suggests that likely will not be the case."  End


Reported by Siddharth Upasani

Edited by Shirsha Thakur


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