RESILIENT : DESPITE PERSISTENT CHALLENGES TO WORLD ECONOMY.

 IMF'S World Economic Outlook July 2023 Update  focused on both resilience and persistent challenges of global economy.Global growth is projected to fall from the estimated 3.5% in 2022 to 3.0% in both 2023 and 2024. These forecasts are based on assumptions like- stable fuel and non fuel commodity prices and interest rates.Unfortunately the growth forecast for 2023-24 remained below the annual average of 3.8% achieved during 2000-19 period.While in advanced economies growth declined in emerging market and developing economies growth outlook remained stable for 2023 and 2024 with further shifts across regions.

An examination of growth pattern  indicated that advanced economies growth declined from 5.4% in 2021 to 2.7% in 2022  with projected meagre growth of 1.5% in 2023 and  1.4 in 2024 ,largely due to stagnation in manufacturing sector and disruption in supply chain.Within advanced economies USA had  high growth of 5.9% in 2021which  declined to 2.1% in 2022, and projected to reach 1.5% in 2023and 1.0 % in  2024..Euro area as such also witnessed more or less the same pattern of decline from 5.3 in 2021 to 3.5 in  2022,0.9% in 2023 and 1.5 in 2024.Among Euro area France performed high growth of 7.0 in 2021, declined to moderate level of 3.7 in 2022 but  further slipped to just 1.1 in 2023 and  0.9 in 2024. respectively .Germany had poor growth record  of 2.6 2021,1.8 2022,negative -0.3 in 2023 and  1.3 2024 for the same period. France experienced 7.0% growth in 2021,3.7 in 2022, projected to grow just 1.1 in 2023 and 0.9 in 2024.United Kingdom grew 7.6% in 2021,moderate 4.1in 2022 but expected to grow only 0.4 in 2023 and 1.0 in 2024.

Among Asian region Japan recorded very low rate of growth of 2.2 in 2021,1.0 in 2022,and is projected to grow 1.4 and 1.0 in 2023 and 2024 respectively .On the other hand China recorded 8.4% in 2021,3.0 in 2022, and forecasted to grow 5.2 in 2023 and 4.5 in 2024.Comparatively vibrant Indian economy achieved 9.1% growth in 2021,7.2 in 2022 and is projected grow 6.1% in  2023 and 6.3% in 2024.Growth in emerging and developing Asia is on track to rise to 5.3% in 2023 and moderate 5.0% in 2024.In China growth forecast remained unchanged from April WEO but with a change in composition of increased consumption growth and underperformed investment due to down tum in real estate sector, offset by stronger net exports . Growth projected for India is 0.2% upward revision compared with WEO April projection largely buttresed by higher domestic investment and stronger than expected growth in fourth quarter of 2022.While growth in emerging and developing Europe is projected to rise to 1.8% in 2023 and 2.2% in 2024,Latin America and the Carribbean is expected to see a growth decline from 3.9% in 2022to1.9% in 2023 and reach 2.2% in 2024.Middle East and Central Asia is projected to decline from 5.4% in 2022 to 2.5% in 2023 mainly attributed to growth slow down in Saudi Arabia and production cuts of crude announced by OECD'S+ countries.On the other hand growth in Sub Saharan Africa is similarly projected to decline to 3.5% in 2023 before picking up to 4.1% in 2024 largely due to under performance  in countries including South Africa and Nigeria. 

As per the update despite moderate growth impulses,the world trade is expected to decline from 5.2% in 2022 to 2.0% in 2023 before rising to3.7% in 2024 well below the 2000-19 average of 4.9% . The decline in 2023 is attributed to decline in global demand and appreciation of US Dollar. In the context of widespread invoicing of products in US dollar shifts towards domestic currencies increased .Impact of trade deficit and inflation persisted due to global warming, drought conditions which in turn raised commodity prices .On the other hand Russia Ukraine war further intensified rise of food,fuel and fertiliser prices.However global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.While debt distress increased in emerging market and developing economies. Geo economic fragmentation intensified in many countries due to separate blocks, geopolitical tensions with more restrictions on trade, cross border  movements of capital, technology , workers and international payments.Despite easing of debt distress after March 2023 banking stress, the borrowing costs of emerging and developing economies continued to remain high.Financial Stability Report has already indicated easing of financial conditions. Concerns about banking sector have also eased. However growth in bank loans in advanced economies has slowed down and high interest rates will lead to tighten credit conditions. But major emerging markets largely remained resilient and avoided uncertain banking sector  turmoil since March 2023.

In the foregoing scenario of global economy policy measures suggested focused on how to promote growth and development.The prescribed  measures included- 1. priority to control of inflation and maintain financial stability and prepare for stress reduction.2.Rebuild fiscal  buffers while providing safety nets to the marginalized and vulnerable sections. Finally most significantly to ease the funding squeeze for developing and low income countries,enhance the supply side and strengthen resilience to climate change .In short IMF's 2023 July update despite showing resilience in global growth, simultaneously indicated  unbalanced and lopsided growth trends that adversely affected not only low income countries in general but also some developed and emerging market economies as well.While India's heavy public borrowings are sustainable the position of debt distressed countries like Pakistan and Srilanka remained problematic inspite of IMF bail out, largely due to high inflation,rising commodity prices supply chain disruptions, food and energy shortages  and impact of Ukraine war and sanctions imposed by US and Western allies.While India remained the fastest growing economy of the  world followed by China, growth in Germany, UK, and France crumbled. Overall there is resilience  in growth despite the lag in some countries which necessitates adoption of  appropriate geo political and economic policy measures collectively. 

Comments

Post a Comment

Popular posts from this blog

NOBEL PRIZE FOR RESEARCH ON INEQUALITY, SOCIAL INSTITUTIONS AND PROSPERITY

 The  2024 Nobel memorial Prize in Economic Sciences were won by the trio Turkish American Daron Acemoglu,Simon Johnson and James Robinson both  British Americans  for their valuable research on wealth Inequality between nations and relationships between societal Inequality and Prosperity. Research into Inequality of  wealth,  across countries by examining various political and economic systems introduced by European colonisers , The trio have demonstrated the relationship between societal institutions and prosperity. While Acemoglu and Simon Johnson are professors at Massachusetts  Institute of Technology, whereas  Robinson is serving at Chicago University. The Jury highlighted that  through  their research work they have illuminated how economic and political institutions play a decisive role in determining that while some countries prospers others do not.As they researched on global inequality in wealth and reasons for some countries ...
Read more

FROM DISCONTENTS TO PROGRESSIVE CAPITALISM: IS IT WORKABLE IN INDIA ?

Nobel Laureate Joseph  E Stiglitz a public policy activist and development economist associated with research and policy making in World Bank and other countries including USA, China and Singapore made a scathing attack against ongoing globalisation and activities of global institutions  in his  brilliant work "Globalisation and its Discontents " in 2001 .After two decades he has brought another path breaking study entitled " People ,Power and Profits:Progressive Capitalism for an age of discontent" suggesting various measures to overcome inequality of income and wealth, unemployment, malnutrition,poverty, climate change etc as bye products of discontents of globalisation.In this context it is relevant to mention about the role of economic system which refers to the sum total arrangements for  production and distribution of goods and services in an economy. While in a primitive feudal society customs and practices shape the pattern of resource allocation and distrib...
Read more

IMPACT OF ARTIFICIAL INTELLIGENCE (AI) PROBLEMS AND PERSPECTIVES

 .ARTIFICIAL INTELLIGENCE  When American computer scientist John Mc Carthy initially endorsed the term "Artificial Intelligence and further followed by another four scientists including Alan Turming none took it seriously that technologies like  pattern recognition, machine learning, neural networks, big data, self Al etc are all set to shape the future of humanity in terms of security, polity,economy, society and governance. Artificial alogretchc Intelligence (AI) is a branch of study that utilises machines to substitute human intelligence by performing tasks like learning, reasoning  and making decisions. AI provides a set of technologies which enables computers to perform variety of advanced functions including the ability to see,understand and translate spoken and written language, analyse  data, make recommendations and more...whch can revolutionise life across the globe. According to the existing primary classification AI can be classified into four - reac...
Read more