The International Monetary Fund upgrades the economic forecasts for China and India, predicting that global growth will continue to be sluggish.

• This year, China and India are projected to contribute nearly half of the world's growth, as the International Monetary Fund has revised its growth forecast for both countries.
• The IMF previously labeled India as the world's fastest-growing major economy, but now predicts that it will grow 7%, an increase from the earlier projection of 6.8%.
• Despite the IMF's optimism for Asia, global growth forecasts remain stagnant.

This year, almost half of global growth will be contributed by China and India, as the International Monetary Fund has upgraded its growth forecast for both countries.

The International Monetary Fund (IMF) stated on Tuesday that China's economy is projected to expand by 5% this year, which is higher than its initial forecast of 4.6% but lower than the anticipated growth of 5.2% in 2023.

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.

The stronger consumer activity and exports in the first quarter of 2024 contributed to the rosier forecast for that year, according to Pierre-Olivier Gourinchas, the IMF's chief economist.

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.

India growth to slow

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.

Gourinchas stated that the emerging market economies of Asia, particularly India and China, continue to drive the global economy. Despite this, the prospects for the next five years are not promising.

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."