Asian economies could see a modest recovery next year, boosted by stronger export demand and stimulus spending, the IMF said on Wednesday.
Trade-driven Asia has been hit harder than expected by the worst global downturn since the 1930s, though many economies are stronger than they were during the region’s 1997 financial crisis, the Washington-based IMF said in a report.
“A modest recovery is projected in 2010, underpinned by a pickup in global growth and a boost from expansionary fiscal and monetary policies,” the IMF said in its semiannual World Economic Outlook report.
Japan, the region’s economic giant, should eke out 0.5 percent growth next year after shrinking by 6.2 percent this year, the IMF said. It said South Korea, Taiwan and other newly industrialized economies were forecast to grow by 0.8 percent following a 5.6 percent contraction this year.
Growth for China, India and other emerging economies is forecast to rise to 5.3 percent after falling to 3.3 percent this year, the IMF said.
But the IMF also cautioned that Asian economies face risks if global demand weakens further and said they can do more to reduce reliance on exports by boosting domestic consumption.
“A key concern is that a deeper or longer recession in advanced economies outside Asia will reduce external demand even further, with negative repercussions for exports, investment and growth,” it said.
The main challenge will be to “achieve a sustained reduction in the region’s reliance on exports as a source of growth,” the IMF said.
Though China, Japan and others have launched stimulus plans, it said: “There is scope to do more to bolster domestic demand in a number of economies” that can afford it.
China’s growth is forecast to rise to 7.5 percent next year after falling to 6.5 percent this year — half of 2007’s 13 percent rate.
India’s growth is expected to climb to 5.6 percent next year after dropping from 7.3 percent last year to 4.5 percent this year.
In Asia’s worst contraction, Singapore’s economy is expected to shrink by 10 percent this year and by another 0.1 percent next year, the IMF said.
The IMF projected the global economy would shrink 1.3 percent this year, saying the financial crisis was proving more entrenched than expected.
The world economy was sliding into “the deepest post-World War II recession by far,” and the outlook was “exceptionally uncertain,” with risks weighing on the downside, the 185-country institution said.
It was the third time the IMF has slashed its 2009 world growth estimate this year. In January, the multilateral institution saw growth of 0.5 percent, but by March it had forecast a contraction of between 0.5 percent and 1 percent.
The US economy would contract 2.8 percent this year, while the eurozone would shrink 4.2 percent. The IMF forecast contractions of 4.1 percent in Britain and 6 percent in Russia.
The IMF predicted a slow recovery next year, with the rate of contraction expected to be “moderate” from the second quarter onward.
The growth next year would come entirely from the emerging market and developing countries, at 4 percent.