New Delhi, India remains the fastest growing economy in the world, with investment and private consumption driving growth, according to the IMF’s latest Regional Economic Outlook for Asia-Pacific.
The IMF, in its World Economic Outlook report released on October 2, maintained India’s gross domestic product (GDP) growth forecasts at a robust 7 percent and 6.5 percent for FY25 and FY26 respectively.
Although growth in Asia is expected to slow in 2024 and 2025 – due to waning support from the pandemic recovery and factors such as an aging population – the short-term outlook in April was more favorable than expected, the regional economic outlook report said.
The IMF said growth for the Asia-Pacific region in 2024 has been revised up marginally by 0.1 percentage point to 4.6 percent, mainly reflecting the robust performance at the start of the year. With this, the Asia-Pacific region is expected to contribute about 60 percent of global growth this year.
“However, the outlook is subject to significant economic and geopolitical uncertainties,” the report said.
An IMF blog post, along with the regional outlook report, said that while manufacturing has been the growth engine in Asia, a transition to modern, tradable services could be a new source of growth and productivity.
It says service sector growth has already attracted about half of the region’s workers to the sector, up from just 22 percent in 1990, while hundreds of millions have moved off farms and factories.
“This shift is likely to accelerate with the further expansion of international trade in modern services such as finance, information and communications technology, as well as business outsourcing, as is already happening in India and the Philippines, for example,” the blog post said.
In 2025, looser monetary conditions are expected to support activity, resulting in a slight upward revision in growth to 4.4 percent, compared to 4.3 percent in April. Inflation has declined in much of the region. At the same time, risks have increased due to increasing geopolitical tensions, uncertainty about the strength of global demand and the potential for financial volatility. Demographic changes will increasingly act as a drag on activity, although structural shifts to high-productivity sectors such as tradable services hold the promise of robust growth, the report said.
–IANS
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