International Monetary Fund keeps India’s FY17 GDP growth forecast unchanged at 7.5%

It said that hard on the heels of China announcing its GDP growth rate was 6.9 percent in 2015, the slowest in 25 years, the International Monetary Fund cut its global growth forecasts for this year and the next by 0.2 percentage points, predicting 3.4 percent growth for 2016 and 3.6 percent for 2017.

“The recession caused by political uncertainty amid continued fallout from the Petrobras investigation is proving to be deeper and more protracted than previously expected”, the International Monetary Fund said in the report.

The fund said risks to the global outlook remain tilted to the downside, with the world facing three big adjustments: the emerging-market slowdown, China’s shift to growth driven less by exports and manufacturing, and the Federal Reserve’s gradual exit from ultra-low interest rates.

“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects”, said Maurice Obstfeld, IMF Economic Counsellor and Director of Research.

The IMF also projects 6.3 percent economic growth in China this year, dropping to 6 percent next year. The malaise in China, which devalued its offshore-traded currency last week, follows the sharp stock market crash last summer and ongoing capital outflows from the economy. IMF’s projection of 7.3 % is within the government’s estimate of 7-7.5 % expansion this financial year ending March. For India, it retained the growth forecast at 7.3 per cent for the current fiscal and 7.5 per cent for 2016-17 and 2017-18.

Brazil will stay mired in recession in 2016, with output contracting 3.5 percent, a 2.5 percentage-point downward shiftfrom the previous forecast, and there will be essentially no growth in 2017 as Latin America’s largest economy struggles with lower Chinese demand. Beijing holds considerable sway over the global economic policy agenda this year’. “We may be in for a bumpy ride this year, especially in the emerging and developing economies”.

The 2016 budget also projected reduced revenues of SAR 517bn, mainly due to low oil prices.

The U.S. economy is projected to grow by 2.6 percent this year and next year, down from October projections of 2.8 percent.

‘China’s importance to the global economy and financial markets is growing, and we (the rest of the world) must realize that China is an economic superpower, ‘ Bergvist said. Both figures would be improvements over 2015’s 3.1 percent growth.