IMF GLOBAL ECONOMIC GROWN FORECAST: A STORY OF MEDIOCRITY – BY Dr. BOBBY SRINIVASAN AND Dr. SUDHAKAR BALACHANDRAN

October 14, 2014 | Posted by bobbysrinivasan << back to blog

Ms. Christine Lagarde, the current IMF Chief has recently made the observation that the world economy is threatened by a new mediocre of low growth for a long time. This prediction is somewhat a pessimistic news for countries which need growth to create jobs for its citizens. She said that the current economic recovery is at best “brittle, uneven and beset by risks”. Her remarks highlight a steady weakening of global outlook. She said and I quote, “overall the global economy is weaker than we had envisaged even six months ago.” Only a modest pick-up is foreseen for 2015 as the outlook for potential growth has been paired down.
In July 2014, IMF released their forecast for the global economic growth of 3.4% this year and 4% next year. Given this new announcement, we should be prepared for a lower guidance value. The entire global economy is looking to the emerging market economies to fill the void. However, IMF recently published research noting an unprecedented and synchronized slowdown in growth for emerging economies.
Ms. Lagarde was suggesting bold actions by all countries. Indirectly, she was indicating that all countries should lower the interest rates and engage in quantitative easing. She was suggesting big investment in infrastructure.
Last week the US economic growth data along with payroll job creation was announced. The US economy grew at an annualized rate of 4.6% with nearly on an average of 230,000 jobs added in this financial year. Compare this with the average layoff 750,000 jobs every month in the financial year 2008-09. Given what Ms. Lagarde has to say this data indeed, is a source of hope.
The global economy is at an inflexion point. It has a choice. For example, it can muddle along with sub-par growth – a new mediocre – it can aim for a better path where bold policies would accelerate growth, generate employment and achieve a new momentum. This is the opinion of Ms. Lagarde.
As far as India is concerned, we are hoping that a miracle will happen to the Indian economy. After having suffered policy paralysis for a long time, India has opened doors in a big way for the FDI. PM Modi has already alerted our major trading partners namely China, Japan and USA about our intentions. It is our hope that Indian growth rate will regain momentum in the coming years so that a growth rate of 8% becomes a new normal.

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