New Delhi: The International Monetary Fund (IMF) has said that due to the Covid-19 epidemic, the debt in the private sector has increased significantly, due to which the economic growth of developing countries may see a decline of up to 1.3 percent in the next 3 years. If the IMF is to be believed, it will also have an impact on developed countries, but their growth is expected to decline by only 0.9 percent.
The IMF gave this information in the ‘World Economic Outlook‘ report released on Monday. The IMF said, “Global private debt has increased to 13 percent of GDP in 2020 and has increased in almost every country. Its pace has been faster than the global economic crisis of 2008 and at the same time, it is now showing a sharp increase in public debt.
The sharp increase in debt is not a good sign
The IMF said on Monday that debt in the private sector had increased significantly before the Russo-Ukraine war and the impact of the war on the private sector’s balance sheet has not yet been assessed. According to IMF, the sharp increase in debt may not be sustainable and may even lead to below-average growth. The IMF said, “In short, weak financial conditions encourage borrowing, this leads to increased expenditure, growth and value of assets, and then the trend of borrowing by pledging these assets starts. This ends when the returns are significantly lower, the lenders become suspicious of their recovery and stop making fresh loans, or the financial situation becomes critical and the cost of borrowing increases.
The growth rate of developing countries
The IMF said in an estimate in January that the growth rate of developed countries is expected to average 3.9 percent in the year 2022 and it will be around 2.6 percent in 2023. At the same time, the economic growth of developing countries was projected to grow at 4.8 percent in 2022 and at 4.7 percent in 2023. However, IMF Managing Director Kristalina Georgieva has expressed fears of further reduction of these estimates. He has said that in view of the global conditions created due to the situation arising out of the Russia-Ukraine war, the IMF may further reduce the growth rate estimates. The IMF will release its revised estimates for countries around the world on Tuesday, 19 April.
What is the IMF’s estimate for India?
In its report released in January, the international organization had projected India’s GDP to be 9 percent in the fiscal year 2022. At the same time, in the financial year 2023, it projected the Indian economy to grow at the rate of 7.1 percent. However, this IMF estimate predates the Russo-Ukraine war when oil and gas prices were not sky high in the international market.
