International Monetary Fund deepens India’s economic gloom, slashes growth outlook

Friday, 16 Oct, 2020

In response to Congress leader Rahul Gandhi's dig at the Bharatiya Janata Party (BJP) led Centre over the International Monetary Fund (IMF) forecast for India's GDP, government sources have said that India's GDP is 11 times more than that of Bangladesh. Export powerhouse Germany will see a 6 per cent contraction this year, while Spain's economy, more dependent on tourism, will shrink by 12.8 per cent.

The IMF projects a partial and uneven recovering in 2021, with global growth expected to reach 5.2%, but warns that significant risks remain, including the resurgence of the virus.

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Bangladesh's gross savings rate was recorded at 30.1% in June 2020, and 29.5% in June 2019, against a record low of 27.4% in June 2018, data showed.

The worldwide agency said it now expects global GDP to fall by 4.4% this year, slightly better than its June forecast of a 4.9% contraction in 2020.

The IMF's Managing Director Kristalina Georgieva stressed that such economies need an early and decisive restructuring for their debts to mitigate the heavy impacts on their economies, adding that these economies have worked swiftly in responding to the challenges imposed by the pandemic and they need to maintain this.

The forecasts reflect revised foreign exchange weightings for purchasing power parity that slightly increase the influence of advanced economies on global output.

The World Bank said up to 150 million more people may be pushed into extreme poverty by 2021, the first time it has worsened in more than two decades, while the International Monetary Fund warns the crisis will exacerbate inequality, especially for women.

However, IMF expects a sharp economic recovery in India in 2021, which could push the country's per capita GDP to $2,030, marginally ahead of Bangladesh's projection of $1,990.

Close to 90 million people are expected to fall into extreme deprivation this year.

There are countries where the situation is much more hard because of very high debt levels, that are not able to access markets at all, or only at prohibitively high cost, Georgieva said.

G20 finance officials urged the International Monetary Fund and the Bank, and other multilateral development banks, to keep looking for options to help struggling countries, but failed to back a broader issuance of new Special Drawing Rights, the IMF's currency, which would be akin to a central bank printing money.

As countries continue to struggle with the economic damage inflicted by the Covid-19 pandemic, the IMF's Fiscal Monitor report also urges policymakers to invest in job-creating projects like infrastructure and green energy.

China will continue to build an open economy and is willing to boost economic policy coordination with other countries to contribute to stabilization and recovery, the ministry said. At the same time, it could also lead to a sharp fall in global equity prices by narrowing the now large gap between equity prices and the state of the global economy.

The IMF's WEO report, released in April and October with an update provided in June, said recovery from the pandemic while COVID-19 infections are still spreading is "not assured". But she said a second package would add two percentage points to that growth, bringing the U.S economy back to pre-pandemic levels much more quickly.