IMF hints at 'sustained slowdown' in China, India in 2025

The International Monetary Fund (IMF) has retained India's GDP growth forecast at 7% for 2024 and 6.5% for 2025, down from 8.2% in 2023, citing exhaustion of pent-up demand accumulated during the COVID-19 pandemic. In its World Economic Outlook report titled ‘Policy Pivot, Rising Threats’, the IMF says Emerging Asia’s strong growth is expected to subside, from 5.7% in 2023 to 5% in 2025. "This reflects a sustained slowdown in the region’s two largest countries."

In China, it says, the slowdown is projected to be more gradual. "Despite persisting weakness in the real estate sector and low consumer confidence, growth is projected to have slowed only marginally to 4.8% in 2024. Its forecast has been revised upward by 0.2 percentage point in 2024 and 0.4 percentage point in 2025."

Among emerging markets and developing economies, Russia and India drove most of the upward revision this time.

Like advanced economies, the growth outlook for "emerging markets" and "developing economies" is "remarkably stable" for the next two years, hovering at 4.2% and steadying at 3.9% by 2029, says the IMF. The World Economic Outlook forecasts 3.2% global growth for 2024-2025, with U.S. upgrades offset by Europe downgrades.

IMF declares inflation battle mostly won

The global battle against inflation has largely been won, even though price pressures persist in some countries, the IMF has said.

The global financial agency says after peaking at 9.4% year-over-year in Q3 2022, headline inflation rates are now projected to reach 3.5% by the end of 2025, which is below the average level of 3.6% between 2000 and 2019.

The fall in inflation comes despite a sharp and synchronised tightening of monetary policy around the world, the IMF says, adding the global economy has remained 'unusually' resilient that helped avoid a "global recession". In line with this, global growth is projected to hold steady at 3.2% in 2024 and 2025.

The IMF says the return of inflation to near central bank targets calls for a much-needed policy triple pivot. The first—on monetary policy—has started, says the Washington, D.C.-based global agency. "Since June, major central banks in advanced economies have started to cut their policy rates, moving their policy stance toward neutral. This will support activity at a time when many advanced economies’ labour markets are showing signs of weakness," says Pierre-Olivier Gourinchas, economic counsellor, IMF.

The second pivot is on fiscal policy. "After years of loose fiscal policy, it is now time to stabilise debt dynamics and rebuild much-needed fiscal buffers," he says. The third pivot—and the hardest—is on structural reforms, says IMF. "Much more needs to be done to improve growth prospects and lift productivity".

The Reserve Bank of India in this month's monetary policy committee announcements kept the repo rate unchanged at 6.5% while changing the stance to ‘neutral’. The RBI has projected CPI inflation for 2024-25 at 4.5% with Q2 at 4.1%, Q3 at 4.8% and Q4 at 4.2%. "It is with a lot of effort that the inflation horse has been brought to the stable," said Das.