Asian economies are set to lead world growth this year, expanding at a 5.6 percent pace that is level with last year, as recoveries in India and Japan help offset China’s slowdown, the IMF said in a report yesterday.
However, IMF economists expressed concern over the potential for weaker growth if regional policymakers fail to follow through with needed changes, saying it is not a time for “alarm, but it is a time for alert.”
The IMF’s regional economic outlook forecasts that growth in the Asia-Pacific area is set to moderate to 5.5 percent next year.
Asian growth fell to 5.5 percent last year from 5.9 percent in 2013 and is bound to shift lower as China’s economy settles at a more sustainable level than the double-digit pace of the past decade.
China’s report of 7 percent growth in the first quarter of the year was in keeping with that trend.
“You cannot expect that a country can keep 10 percent growth forever,” IMF Asia and Pacific Department director Changyong Rhee said. “The current phase of growth is in line with our forecasts, but even if it is a desirable slowdown, it can have a negative impact on other countries.”
Rising levels of debt and potential financial market disruptions are other risks to growth, though moves by Chinese financial regulators to rein in margin trading and umbrella trusts are a positive step, he said in a news conference that was broadcast online.
On a broader scale, the IMF report said its estimates show lower oil prices could help boost global growth by 0.3 percentage points to 0.7 percentage points this year.
Major producers of oil and other commodities are suffering from lower exports, but for countries such as Japan, China and Thailand, the lower costs are a boon both for businesses and consumers.
Growth varies widely across the region, from 8.3 percent forecast for this year in Myanmar, 7.5 percent for India and 6.8 percent for China, to 1 percent for Japan.
Japan, the world’s No. 3 economy, shows signs of recovering from a recession last year following an increase in the country’s sales tax to 8 percent from 5 percent.
The IMF’s report said that Japan’s growth would remain modest, but could improve with more aggressive measures to improve productivity through improved labor laws and corporate governance.
Despite its slowdown, China remains a main driver of global GDP expansion, accounting for a larger share of world economic growth than the rest of Asia combined, the IMF said.
Reforms intended to make the state-dominated economy more productive, with stronger domestic consumption and services — and less dependence on trade — are crucial for future growth, Rhee said.
Full reform implementation would boost overall income by 5 percent by 2020 over economic performance without it, he said.
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