China, India to lead global growth over the next five years: IMF report

IMF

China and India will lead the world through their contribution to the global gross domestic product expansion, followed by the US, according to a recent International Monetary Fund (IMF) report.

Based on the data collected from IMF's World Economic Outlook along with further calculations based on the same by Bloomberg, China's slice of the global gross domestic product expansion will be at 22.6 percent, India's will be 12.9 percent, and the US will contribute 11.3 percent.

It is to be noted that China’s contribution to global growth is still going to dwarf the contribution made by the US and India, as it will be nearly double that of the American contribution. China, India and the US are followed by Indonesia, Germany, Turkey, and Japan, each with less than 3.5 percent contribution to the world GDP.

Nearly 75 percent of global growth will stem from just 15 nations, and over 50 percent of this will come from China, India, the US, and Indonesia combined.

“The baseline forecast is for global growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023 with advanced economy growth falling below 1 percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Inflation’s return to target is unlikely before 2025 in most cases,” the report said.

“Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing having risen sharply. Financial sector stress could amplify, and contagion could take hold, weakening the real economy through a sharp deterioration in financing conditions and compelling central banks to reconsider their policy paths.”

Also Read: Unidirectional lowering of growth forecasts by IMF is worrisome: Sachchidanand Shukla

The IMF expects growth contributions from BRICS nations i.e. Brazil, Russia, India and China outpacing the contributions made by Group of Seven (G-7) nations. Overall, the IMF anticipates global growth to expand about 3 percent over the next five years in a higher-interest-rate environment. This is the weakest growth outlook projection by IMF in over three decades.

The IMF report further contemplated on the recent bank turmoil in the US i.e., the collapse of Silicon Valley Bank (SVB), Signature Bank in addition to the trouble endured by Silvergate Bank. Apart from the same concerns were also raised on the persistent challenges faced by other prominent financial institutions like Credit Suisse after its recently announced merger with UBS along with how sticky inflation has heightened the challenges for the global economy and ramped up chances of a deeper recession than earlier anticipated.