The IMF yesterday sharply slashed its growth outlook for Asia, predicting a “long and severe recession” for the region’s wealthier but export-reliant economies.
The US-based institution said it now expected growth in Asia would slow to 1.3 percent this year after a forecast late last year of 2.7 percent.
“The spillovers from the global crisis have impacted Asia with unexpected speed and force,” the IMF said in its regional economic outlook.
“Prospects for an imminent rebound of economic activity are weak,” it said, underlining that the region was heavily dependent on exports at a time when demand had weakened.
It said it expected 4.3 percent growth next year, down from a forecast of 4.5 percent.
For emerging countries in Asia, the IMF lowered its growth forecast to 3.3 percent from 4.4 percent. It put next year’s growth at 5.4 percent, down from an initial 6 percent.
The region’s wealthier economies “are expected to experience a long and severe recession” because of their heavy reliance on high-tech exports and extensive exposure to the global financial system, the IMF said.
Joshua Felman, an IMF assistant director, said Asia’s merchandise exports fell at an annualized rate of 70 percent between September last year and February this year, substantially worse than during the 1997 to 1998 Asian financial crisis.
“Why has the impact on Asia been so jarring? The answer lies in Asia’s exceptional integration into the global economy,” Felman said in Singapore. “Much of the region relies on technologically sophisticated manufacturing exports ... precisely those products which global demand has collapsed.”
Massive stimulus measures unveiled by several Asian governments were unlikely to help the region turn around strongly, and a rebound hinges on when the global upswing begins, he said.
“Whenever exports have slumped, Asia has typically slipped into recession — and Asia does not recover until exports have started to revive,” he said.
The IMF in the report urged Asia to “rebalance” its growth model and focus more on spurring domestic demand.
Japan was projected to shrink 6.2 percent this year. Growth in China was expected to be 6.5 percent this year, and in India was forecast to be 4.5 percent.
Hong Kong and Singapore were expected to shrink 4.5 percent and 10 percent respectively, the IMF said.
RSS