The International Monetary Fund upgrades India's economic forecast, predicting that global growth will remain sluggish.

• The IMF previously labeled India as the world's fastest-growing major economy. However, it is now predicted that India will grow 7% in 2024, surpassing the earlier projection of 6.8%.
• The International Monetary Fund (IMF) has forecasted that China's economy will expand by 5% in 2021, in line with its May projection.
• Almost half of global growth this year will originate from India and China.

The International Monetary Fund has revised its economic outlook for India in 2024, predicting a decline in growth the following year.

The IMF previously labeled India as the world's fastest-growing major economy, but now predicts that it will grow 7% in 2024, surpassing the earlier projection of 6.8%. This increase is mainly due to enhancements in private consumption, particularly in rural areas, according to the report.

The financial agency predicted that growth will decline from 8.2% in the fiscal year from April 2023 to March 2024 to 6.5% in 2025.

China, the world's most populous country, is expected to become the second-largest economy by 2075, and has been attracting investors such as tech giants as the country works towards becoming a manufacturing powerhouse.

The global economy's primary driver are Asia's emerging market economies, with India and China's growth being revised upward and accounting for nearly half of global growth, according to Pierre-Olivier Gourinchas, the IMF's chief economist. However, prospects for the next five years are weak.

Expectations for China

The International Monetary Fund (IMF) has predicted that China's economy will grow by 5% this year, which is the same as its May forecast. This growth rate is higher than the 4.6% expansion that was predicted in April but lower than the 5.2% growth forecast for 2023, the IMF announced on Tuesday.

The IMF predicts that the GDP of the world's second largest economy will decrease from 4.5% in 2025 to 3.3% by 2029, as stated in their latest World Economic Outlook in July.

Gourinchas noted that the stronger consumer activity and exports in the first quarter of 2024 contributed to the rosier forecast for that year.

In the past 15-20 years, the Chinese economy has experienced significant growth, and it is now less dependent on the external sector for its growth compared to 15 or 20 years ago, as stated in a press briefing.

"The fact that China is larger implies it has a larger impact globally. While a small increase in trade surplus may seem insignificant to China, it could have a significant impact on the rest of the world."

Before the release of China's latest GDP numbers, those projections were made.

Chinese official data revealed that its economy grew 4.7% year on year in the second quarter, which was below the 5.1% growth predicted by economists surveyed by Reuters.

"Gourinchas cautioned that consumer confidence and issues in the property sector in China may still be hindering growth, which is a potential risk to the Chinese economy, as indicated by our data."

The IMF is hopeful that consumption will rebound in the near future, but declining birth rates will impede productivity, which will ultimately slow down the economy.

Almost half of global growth this year will originate from India and China.

Europe, U.S. growth

The International Monetary Fund (IMF) anticipates that global growth in 2024 will remain at 3.2%, the same as its April projection, and is likely to increase slightly to 3.3% in 2025.

This year, the U.S. economy is expected to increase to 2.6% from 2023, although it was previously projected to reach 2.7% in April.

The inflation rate for the world's largest economy decreased to 3% in June from 3.3% in May.

Jerome Powell, the Federal Reserve Chair, stated on Monday that the central bank will not wait for inflation to reach 2% before cutting interest rates, and that a "hard landing" for the economy is unlikely to occur.

Gourinchas stated that inflation dynamics in the U.S. seem to be moving in the correct direction.

"We've encountered obstacles, and we should expect more to arise, potentially causing delays in the pace and speed of inflation's decline."

He highlighted that U.S. public debt remains a grave concern.

The growth forecast for the euro zone in 2024 has been revised to 0.9%, which is 0.1 percentage point higher than the April projections. This increase is due to the stronger performance of services and unexpectedly high net exports in the first half of the year.

The International Monetary Fund (IMF) predicts that growth in the region will increase to 1.5% in 2025 due to rising real wages and increased investments.

Petya Koeva Brooks, deputy director in the research department of the IMF, stated that Spain is a bright spot in the euro area with an upgraded forecast of 2.4% for this year.

"The revision was largely influenced by the positive results in the first quarter of this year, which included robust services, exports, and a surge in investment."

The IMF's latest forecast for China's growth remains unchanged from May.