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IMF’s Forecast for Major Economies

Why is it in the news?

  • Recent data from the International Monetary Fund (IMF) reveals that Japan has slipped to become the world’s fourth-largest economy, lagging behind the United States, China, and Germany.

Some of the key findings

  • Economic Contraction: The IMF highlights that Japan’s economy contracted by 0.4% at an annualized rate during the October-December period of 2023.
  • Nominal GDP Growth: Despite the economic contraction, Japan’s nominal Gross Domestic Product (GDP) recorded a growth of 1.9% in 2023. However, when compared in dollar terms, Japan’s GDP stood at $4.2 trillion, trailing behind Germany’s $4.5 trillion.
  • Weak Yen: Japan’s economic competitiveness and productivity have been hampered by a weak yen, affecting its export-oriented industries and global market competitiveness.
  • Aging Population: Japan faces demographic challenges, including an aging and shrinking population, which poses long-term concerns for workforce productivity, consumption patterns, and social welfare systems.
  • Declining Productivity: Structural issues and insufficient reforms have led to declining productivity levels in Japan, further impeding economic growth and competitiveness.

Other Key Highlights

  • The United States has consistently maintained its position as the world’s largest economy since 1960, reflecting its economic resilience and stability over the years.
  • In contrast, China has emerged as a global economic powerhouse, experiencing remarkable growth from the fourth-largest economy in 1960 to the second-largest in 2023. China’s economic growth is primarily driven by its robust manufacturing sector, export-oriented strategies, substantial investments in infrastructure, and the rapid expansion of its domestic consumer market.
  • India, ranked fifth in the world’s GDP rankings in 2024, has witnessed significant economic growth following economic liberalization reforms initiated in the early 1990s. India’s economy is characterized by diversity and dynamism, fuelled by key sectors such as information technology, services, agriculture, and manufacturing. Factors contributing to India’s economic growth include a large domestic market, a youthful and technologically adept workforce, and a burgeoning middle class.

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