India, China to contribute half of growth

India and China are projected to contribute 50% of global economic growth this year, according to the managing director of the International Monetary Fund (IMF), Kristalina Georgieva. Speaking ahead of the IMF and World Bank’s spring meetings, Georgieva warned that low-income countries would find it difficult to catch up due to slower growth. She said this was a “severe blow” and could increase poverty and hunger, an issue that was already a result of the Covid-19 pandemic. Georgieva added that the world economy would continue to see a sharp slowdown due to the pandemic and the aftermath of the Russia-Ukraine war, with growth expected to be less than 3% in 2023.

Georgieva attributed some momentum to emerging economies in Asia, particularly India and China. However, she explained that other countries faced a steeper climb. She stated that global growth in 2022 dropped by almost half, from 6.1% to 3.4%, after a strong recovery in 2021 was followed by the shock of Russia’s war in Ukraine and its wide-ranging consequences.

Georgieva expressed concerns about the banking system, stating that although it had “come a long way” since the 2008 financial crisis, there remained concerns about vulnerabilities that may be hidden not just at banks but also non-banks. She warned that now was not the time for complacency, especially with central banks hiking interest rates worldwide to combat skyrocketing inflation rates. Georgieva said that 90% of advanced economies were projected to experience a dip in their growth rates this year. Higher borrowing costs, especially when export demand has weakened, would be a challenging issue for low-income countries, she added.

The IMF and World Bank’s spring meetings would provide policymakers with an opportunity to discuss the most pressing issues of the global economy. Georgieva’s comments highlighted the challenges faced by the world economy and low-income countries. She called for collective action to tackle the challenges and to prevent further damage caused by the Covid-19 pandemic and geopolitical tensions.