WORLD ECONOMY:NAVIGATING GLOBAL DIVERGENCES

 IMF's  half yearly report"World Economic Outlook" October 2023 released currently indicated that global economy still continues to recover slowly from the blows of pandemic, Russian invasion of Ukraine,cost of living crisis and impact of war on energy and food markets.In addition to that there was unprecedented tightening of global monetary conditions to combat decade high inflation in many countries.As a result even though the global economy has slowed but it has  not stalled.However economic growth remained slow and uneven with growing global divergences and global economy is limping back, but not sprinting.

IMF's global growth forecast showed a decline from 3.5% in 2022 to 3.0 % in 2023 and 2.9% in 2024.Update to the World Economic Outlook released earlier indicated slow down for advanced countries from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024.But US growth is projected  to  remain both 2.1% in 2022 and 2.1 % in 2023 and decline to 1.5% in 2024.The performance of Euro Area continues to be dismal as against 3.3% in 2022 to mere 0.7% in 2023 and and 1.2 in 2024.For Germany growth declined from 0.8 % in 2022 to -0.2 % in 2023 and further increased to 1.7 % in 2024, whereas for France corresponding figures are 0.7% in 2022, 1.0 in 2023,and1.5 in 2024.For U K projections are 0.6,0.6 and 0.8 respectively for 2022,2023, and 2024. Emerging market and developing economies performed better than expected with projected growth of 4.1% in 2022 to 4.0% in both 2023 and 2024.Emerging and developing Asia  are projected to achieve with a robust 4.5% in 2022,  5.2% in 2023 and 4.8% in 2024..China grew at 3.0% in in 2022, and forecasted with 5.0% in 2023 and further to grow 4.8% in 2024.Above all India continues her stellar growth performance with 7.2% in 2022,6.3 % both in 2023 and 2024.According to IMF India's contribution to global GDP is set to increase 2% points from 16% to 18% in the next five years. Infact, altogether the downward revision of  global growth by 0.1% in 2024 projected by IMF can be attributed to adverse  developments in Chinese real estate sector that is impacting adversely the Chinese economy.

Outlook for global headline inflation is expected to steadily decline from its peak level of 8.7% in 2022 to 6.9% in 2023.and 5.8% in 2024.About three fourth economies are expected to see lower head line inflation in 2023.On the contrary the pace of disinflation is especially pronounced for advanced economies.There are large differences in inflation across major economies . The Euro Area is expected is expected to witness a sharp fall in inflation in 2023 to the extent of 6.6% points from 9.9% in the fourth quarters  of 2023.However emerging geopolitical conflicts if continues to persist will obviously impact food and energy prices and supply chain disruptions. 

       Despite favourable growth impulses indicated in the World Economic Outlook,  numerous adverse risks to global economy are threatening growth.Global Outlook shows a mixed picture on the one hand resilience but growth has weakened in the medium term. Experience has shown that whileinflation has come down but employment remained stagnant. According to  WTO chief supply chains are vulnerable to distortions in production and logistics and transportation. More over services are largely digitally supported now, accordingly digital world require better governance and  monitoring.  Experts advocate that launching of Central Bank Digital Currency CBDC across countries are more viable and secure.Commodity markets are particularly vulnerable in the context of fragmentation.Commodity production is often concentrated due to factor endowments and many commodities cannot be substituted atleast in the short Period. Similarly the Chinese slowdown is bound to impact world economy unless the policy response from China are adequate to revive considerably  While the fiscal space has shrunk, given the absence of inflationary pressures,  People's Bank of China has some room to ease monetary policy. Commodity prices become more volatile amid climate and geopolitical Shocks.Coordinating fiscal and monetary policies are important in the context of rising debt distress, monitoring financial conditions and strengthening financial supervision and to provide financial inclusion and safety nets to the marginalized and vulnerable sections of the society.Above all recent outbreak of unpredictable war between Hamas and Israel poses new challenges to world economy.It is bound to impact not only the widely publicized transcontinental infrastructure project- India Middle East Europe Economic Corridor (IMEEC) but also adversely affect international oil markets and global inflationary pressures. There can be disruptions both in energy prices and transport of oil in the region.Existing studies have already indicated that a given 10% increase in oil prices not only  would reduce global output by 0.15% but also increase global inflation  by at least 0.4%.Hence navigating the divergences of world economy becomes difficult unless appropriate political solutions are  worked out for the existing geopolitical conflicts. Sincere and fairly committed global leaders with humanitarian approach alone could attempt to solve the much vexed problems .Infact a very vibrant UN Security Council coupled with committed world leaders together can take a strong and solid positions in working out viable and successful long-term strategies and solutions to the existing problems.