SYNOPSIS
The IMF’s latest World Economic Outlook report underscores a notable transition in global manufacturing, favoring emerging markets such as India and China. It forecasts India's GDP growth to ease to 7% in 2024 and 6.5% in 2025, as the surge in demand triggered by the pandemic subsides.
In its latest World Economic Outlook report, the International Monetary Fund (IMF) has emphasized a substantial shift in global manufacturing towards emerging markets such as India and China, driven by a decline in competitiveness among advanced economies.
This trend suggests that emerging economies like India are becoming more prominent in the global manufacturing sector.
"Manufacturing production is progressively moving towards emerging market economies, especially China and India, as advanced economies face a decline in competitiveness," the IMF stated in its report.
The IMF report also highlighted a broader change in consumer behavior, shifting from goods to services. This trend is driving growth in the services sector across both advanced and emerging markets.
However, it is also contributing to a slowdown in manufacturing activity, indicating a global economic rebalancing between the manufacturing and services sectors.
The IMF noted, "This rebalancing is boosting activity in the services sector across advanced and emerging markets, but is dampening manufacturing."
For India, the IMF forecasts GDP growth of 7% in 2024, with a gradual moderation in the following years. The report stated, "In India, GDP growth is expected to moderate from 8.2% in 2023 to 7% in 2024, and further to 6.5% in 2025, as the pent-up demand from the pandemic is now largely exhausted."
The report attributed India's economic slowdown to the exhaustion of pent-up demand accumulated during the pandemic, as the economy stabilizes and returns to its potential growth trajectory.
Globally, the IMF noted that the overall growth outlook has remained largely unchanged since its April 2024 report. After the strong rebound following the pandemic, global GDP growth has been steady, hovering around 3% in both the short and medium term.
The IMF stated, "The global projection for GDP growth has been hovering at about 3% in both the short and medium term."
The report also cautioned that this sluggish growth will likely persist beyond the current disinflation phase, indicating that the pandemic may have caused a lasting reduction in potential growth across the global economy.
The report further highlighted the challenges confronting advanced economies, while emphasizing the opportunities for emerging markets like India and China to enhance their roles in global manufacturing.
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