Forecasts by The Economist magazine

From the Economist Intelligence Unit
Source: Country Forecast

India:
The booming economy is likely to keep the United Progressive Alliance (UPA) government, led by the Indian National Congress, in power in 2007-08. The prime minister, Manmohan Singh, will continue to push for economic reforms but will be constrained by the practicalities of governing on a coalition basis. The outcome of the next general election, which must be held by May 2009, is likely to be another coalition government. Monetary policy will continue to be tightened during 2007, but will be eased gradually thereafter. Real GDP growth is forecast to remain very strong during the forecast period, averaging 8.3% in fiscal year 2007/08 (April-March) and 8% in 2008/09. Inflationary pressures will be difficult to control. Strong domestic demand will lead to a significant widening of the merchandise trade deficit over the forecast period, but surpluses on the services and transfers accounts will limit the current-account deficit to less than 3% of GDP in 2007-08.

USA:
The Republican president, George Bush, faces a Congress dominated by the Democrats. Given constitutional checks and balances, this will make it difficult for both Democrats and Republicans to advance their often competing agendas. Instead, both parties will focus on preparing for the 2008 presidential and congressional elections. Federal finances have improved, but there is limited resolve to tackle looming holes in healthcare and public pensions programmes. Monetary policy tightening has ended, with the next move by the Federal Reserve (central bank) expected to be an interest rate cut in September 2007. But higher interest rates are having an adverse effect on the housing market, with knock-on effects on the consumer sector. Real GDP growth is thus forecast to slow from 3.4% in 2006 to 2.5% in 2007. Growth will pick up to 2.8% in 2008, but will not be as consumer-led as in recent years. Imbalances in the economy could trigger a much less benign scenario. The US dollar will come under further downward pressure in 2007 from the prospect of lower rates. The current-account deficit will average 5.6% of GDP in 2007-08.

China:
The main priority for the ruling Chinese Communist Party over the next two years will be to maintain political stability in order to ensure the success of its 17th party congress, due in late 2007, as well as the Olympic Games in the capital, Beijing, in August 2008. As the party congress approaches, the president, Hu Jintao, will continue to strengthen his influence through the appointment of allies to key positions. Real GDP growth will slow from an estimated 10.5% in 2006 to 9.5% in 2007 and 9% in 2008. The government will continue in its efforts to rebalance the economy, as it attempts to make growth less dependent on exports and investment, while introducing measures to boost consumption. The current-account surplus will narrow from an estimated 7.8% of GDP in 2006 to 6.3% of GDP in 2008.