India’s GDP is expected to moderate to 5.8 percent in 2023 as higher interest rates and global economic slowdown weigh on investment and exports, the United Nations said on Wednesday. other South Asian countries “are more challenging”.
According to the World Economic Situation and Prospects 2023 report, world output growth is expected to slow from an estimated three percent in 2022 to 1.9 percent in 2023, marking one of the lowest growth rates in recent decades as a “series of Severe and mutually reinforcing shocks – the COVID-19 pandemic, the war in Ukraine and ensuing food and energy crises, rising inflation, deleveraging and the climate crisis – have battered the global economy in 2022.
The report, prepared by the United Nations Department of Economic and Social Affairs (UN DESA), states that the economic outlook in South Asia has deteriorated significantly due to high food and energy prices, monetary tightening and fiscal vulnerabilities. Average GDP growth is expected to moderate from 5.6 percent in 2022 to 4.8 percent in 2023.
“Growth in India is expected to remain strong at 5.8 percent, albeit slightly lower than the estimated 6.4 percent in 2022, as higher interest rates and a global slowdown weigh on investment and exports,” the report said.
The UN report said “the outlook is more challenging” for other economies in the South Asian region. Bangladesh, Pakistan and Sri Lanka sought financial support from the International Monetary Fund (IMF) in 2022.
While India’s economic growth is expected to moderate to 5.8 percent in calendar year 2023, with higher interest rates weighing on investment and slower global growth weakening exports, the report estimates the country will grow by 6.7 percent in 2024. growing, the fastest-growing major economy in the world.
The report presents a gloomy and uncertain near-term global economic outlook. Global growth is expected to pick up slightly to 2.7 percent in 2024 as some of the headwinds will begin to subside.
However, this is highly dependent on the pace and sequencing of further monetary tightening, the course and impact of the war in Ukraine and the possibility of further supply chain disruptions.
“Now is not the time for short-term thinking or hasty fiscal austerity that exacerbate inequality, increase suffering and could push the SDGs further out of reach. These unprecedented times require unprecedented action,” said UN Secretary-General Antonio Guterres.
“This action encompasses a transformative SDG stimulus package, generated through the collective and collaborative efforts of all stakeholders,” he added.
China is expected to grow at a rate of 4.8 percent in calendar year 2023 and 4.5 percent in 2024, while the US is estimated to grow at 0.4 percent this year and 1.7 percent in 2024.
The direction of Russia’s trade has changed significantly since the start of the war, the report said, adding that while Russian oil has been diverted to Asia and sold at a discounted price, the total value of exports increased in 2022 as the trade with China, India and Turkey increased sharply. .
Russia’s current account surplus was USD 198 billion in the first three quarters of 2022 versus USD 122 billion for the whole of 2021.
The report said that amid high inflation, aggressive monetary tightening and heightened uncertainties, the current downturn has slowed the pace of economic recovery from the COVID-19 crisis, threatening several countries – both developed and developing – with the prospect of a recession in 2023.
In the United States, the European Union and other developed economies, growth momentum weakened significantly in 2022, negatively impacting the rest of the global economy through a number of channels.
In India, annual inflation is estimated at 7.1 percent in 2022, which is above the Central Bank’s target range of 2 to 6 percent for medium-term inflation. Inflation in India is expected to slow to 5.5 percent in 2023 as global commodity prices moderate and slower currency devaluation eases imported inflation.
Most developing countries have seen a slower job recovery in 2022 and continue to face significant job shortfalls. The disproportionate loss of employment for women during the early stages of the pandemic has not been fully reversed, with improvements mainly coming from a recovery in informal jobs, the report said.
The recovery in the labor market is uneven across the region. The report said that among major economies, the unemployment rate fell to a four-year low of 6.4 percent in India as the economy added jobs in both urban and rural areas by 2022.
“In India, the unemployment rate fell to pre-pandemic levels in 2022 due to increased urban and rural employment. But youth employment remained below pre-pandemic levels, especially among young women, given the severe impact of the pandemic for economic sectors where women tend to cluster.
The report calls on governments to avoid fiscal austerity that would stunt growth and disproportionately affect the most vulnerable, hinder progress on gender equality and hinder development prospects across generations. It recommends redistribution and reprioritisation of public spending through direct policy interventions that will create jobs and boost growth. This requires strengthening social protection systems, ensuring continued support through targeted and temporary subsidies, cash transfers and reductions in energy bills, which can be complemented by reductions in consumption taxes or customs duties, it said.
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