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Business News/ Economy / India, China to account for half of global growth in 2023, 2024, says IMF
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India, China to account for half of global growth in 2023, 2024, says IMF

In Asia’s advanced economies, tight financial conditions will hold back demand, while the outlook for exports will depend on price movements of global commodities and tech cycle

The global economic backdrop has remained challenging for economies in the Asia and Pacific region, with central banks tightening monetary policy across the globe. (Image: Pixabay)Premium
The global economic backdrop has remained challenging for economies in the Asia and Pacific region, with central banks tightening monetary policy across the globe. (Image: Pixabay)

Mumbai: Neighbours India and China are expected to jointly account for half of the world’s growth in 2023 and 2024, with the Asia Pacific remaining the ‘most dynamic’ region this year, said the International Monetary Fund (IMF).

In a report titled Regional Economic Outlook for Asia and Pacific, the IMF said that growth in Asia Pacific is expected to rise from 3.9% in 2022 to 4.6% in 2023. IMF staff estimate that Asia’s growth will slow to 4.2% in 2024 and to 3.9% in the medium term - the lowest in the past two decades except for 2020.

The IMF revised upwards India’s growth estimate to 6.3% in FY24, due to resilient domestic demand and strong investment inflows. Meanwhile, the Chinese economy, it said, is expected to expand 5% in 2023 and 4.2% in 2024, lower than 5.2% and 4.5%, respectively, estimated in April.

“In Asia’s advanced economies, tight financial conditions will hold back demand, while the outlook for exports will depend on price movements of global commodities (Australia, New Zealand) and the technology cycle (Korea, Singapore, Taiwan Province of China)," it said.

Per IMF, in Asia’s emerging markets, relatively accommodative financial conditions will aid domestic demand despite monetary policy tightening, although external demand and sluggish investments will pose challenges.

China’s weaker near-term growth outlook will weigh on regional growth, it said, adding that the Chinese economy is expected to expand by 5% in 2023 and by 4.2% in 2024. Compared to the April 2023 World Economic Outlook, this is a downward revision of 0.2 and 0.3 percentage points, respectively on account of renewed weakness in the property sector despite more policy support than previously assumed.

The report pointed out that the global economic backdrop has remained challenging for economies in the Asia and Pacific region, with central banks tightening monetary policy across the globe. However, a fall in global commodity prices from the 2022 peak supported disinflation.

“The boost from China’s reopening in the first half of the year was above expectations. Strong private demand yielded positive growth surprises in India," it said.

While China’s inflation remains low and well-below target, reflecting falling food and fuel prices and still sizable economic slack, headline inflation in India rose in the third quarter due to a weather-related vegetable price shock.

According to the IMF, the emerging market economies of the Association of Southeast Asian Nations (Asean) are expected to see growth of 4.2% in 2023 and 4.6% in 2024—a 0.3 percentage point downward revision relative to April. The downgrade, it said, reflects not only weaker external demand, but also lacklustre domestic demand as a result of monetary policy tightening.

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ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 19 Oct 2023, 11:06 AM IST
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