New Delhi/Washington: The International Monetary Fund (IMF) on Wednesday forecast sharpest slump in Indian economy, projecting a contraction of 4.5 per cent in 2020 owing to COVID-19-induced lockdown and slower recovery.
'India's economy is projected to contract by 4.5 per cent following a longer period of lockdown and slower recovery than anticipated in April.', the IMF's World Economic Outlook report read.
Economic data available at the time of the April 2020, WEO forecast indicated an unprecedented decline in global activity due to the COVID-19 pandemic.
In emerging market economies, the average fiscal response to the pandemic is now estimated at 5 per cent of GDP, sizable but less than in advanced economies. Yet fiscal deficits are projected to widen sharply to 10½ per cent of GDP on average in 2020, more than double the level last year, the IMF said.
Many emerging markets have scaled up their support. India has unveiled liquidity support (4½ per cent of GDP) through loans and guarantees for businesses and farmers and equity injections into financial institutions and the electricity sector.
The Washington-based lender also revised down its forecast for the global economy amid the mounting COVID-19 fallout, projecting a 4.9 per cent contraction in 2020.
The latest projection is 1.9 percentage points below the World Economic Outlook (WEO) forecast released in April, indicating a grimmer economic outlook as the pandemic continues to ripple across the globe.
"Compared to our April World Economic Outlook forecast, we are now projecting a deeper recession in 2020 and a slower recovery in 2021," IMF Chief Economist Gita Gopinath said in a virtual news conference, noting that these projections imply a cumulative loss to the global economy over two years of over 12 trillion US dollars from the crisis.
"The downgrade from April reflects worse than anticipated outcomes in the first half of this year, an expectation of more persistent social distancing into the second half of this year, and damage to supply potential," Gopinath told reporters.
Advanced economies are projected to contract 8 per cent this year, 1.9 percentage points lower than the forecast in the April WEO.