Key facts
- India's wholesale inflation rose to 9.68% in May.
- Rising oil costs due to Middle East conflict are driving inflation in India.
- India's budget deficit may exceed its target, potentially reaching 4.8% of GDP for the fiscal year ending March 2027.
- India recorded a $4.7 billion current account surplus in April.
- Goldman Sachs lowered India's 2026 CAD forecast to 1.3% of GDP.
- The IMF will release an updated global growth forecast on July 8.
- Portugal's central bank maintained its 2026 economic growth forecast at 1.8%.
- Nigeria's annual inflation rate reached a six-month high.
- Portugal's inflation is expected to rise to 3.1% this year.
India's economy is navigating significant challenges, with wholesale price inflation reaching 9.68% year-on-year in May. This sharp increase is attributed to escalating fuel and manufactured goods prices, directly influenced by oil cost hikes stemming from Middle East conflict. The government aims to mitigate concerns from credit rating agencies by framing potential deviations from the fiscal year ending March 2027 budget deficit target, which could widen to 4.8% of GDP, as a result of external pressures rather than fiscal policy shifts.
Despite these inflationary pressures and potential fiscal slippage, India demonstrated economic resilience in April by posting a current account surplus of $4.7 billion. This marks a substantial turnaround from a $4.8 billion deficit in the same month last year, driven by robust inward remittances and a surplus in the services sector. Goldman Sachs has revised its forecast for India's current account deficit (CAD) in 2026, lowering it to 1.3% of GDP from a previous estimate of 2%. The firm also anticipates a balance of payments surplus for 2026, citing strong remittances, healthy services exports, and reduced oil imports as key factors.
Globally, the International Monetary Fund (IMF) chief Kristalina Georgieva indicates that the global economy is weathering the shocks from the Middle East war without immediate signs of a slowdown, though she cautions that risks remain high. The IMF is scheduled to release an updated global growth forecast on July 8. In separate economic developments, Portugal's central bank maintained its 2026 economic growth forecast at 1.8% while trimming its 2026 budget deficit projection to 0.2% of GDP. Inflation in Portugal is expected to rise to 3.1% this year due to higher oil prices. Nigeria has also experienced an increase in inflation, reaching a six-month high, driven by rising fuel prices linked to the Middle East conflict.