International Monetary Fund cuts India’s FY20 growth forecast to 4.8%

Managing Director of the International Monetary Fund Kristalina Georgieva said access to the financial services sector can help address income inequality

The latest edition of the IMF's bi-annual forecast is timed to coincide with the World Economic Forum (WEF)'s annual meeting in Davos, which begins tonight in Switzerland.

Economic growth in Canada is forecast to be 1.8 per cent in 2020 and 2021, unchanged from projections made in October, according to the report. The estimate for 2021 was downgraded by 0.2 percentage points.

The government has over the past few months taken several steps to lift growth, including a cut in corporate tax rates, a real estate fund for stressed housing projects and a national infrastructure pipeline.

At its last update in October 2019, the International Monetary Fund had forecast GDP growth of 3% in 2019 - the slowest rate since the financial crisis - and growth of 3.4% in 2020.

Globally, growth is expected to accelerate to 3.3% in 2020 from 2.9% in 2019 and further to 3.4% in 2021.

"After a synchronised slowdown in 2019, we expect a moderate pick-up in global growth this year and next", IMF Managing Director Kristalina Georgieva said at a press conference on Monday.

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to a continued weakness in investment.

IMF's chief economist, Gita Gopinath, had in December said India's growth forecast was likely to be revised down "significantly" in the upcoming January review.

On the positive side, IMF said market sentiments have been boosted by tentative signs that manufacturing activity and global trade are bottoming out, as well as a broad-based shift toward accommodative monetary policy, intermittent favourable news on US-China trade negotiations, and diminished fears of a no-deal Brexit.

US President Donald Trump signed a deal with China this week that ends the escalation but leaves in place tariffs on two-thirds of the goods imported from the Asian economic power. Instead, the IMF said 2020 United States growth would be 0.1 percentage point lower than forecast in October, at 2.0% because of the fading stimulus effects from 2017 tax cuts and the Federal Reserve's monetary easing. "The slight downward revision of 0.1 percent for 2019 and 2020, and 0.2 percent for 2021, is owed largely to downward revisions for India", she added.

While taking the floor at the Peterson Institute of International Economics in Washington, she cited new IMF research that draws a line between the current economic state and the "roaring 1920s", which climaxed with the 1929 market collapse, assuming grounds for the same trend are already there.

India's economic growth had decelerated to a six-and-a-half-year low of 4.5% in the September quarter.

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