The IMF has lowered its growth forecast for the Asia-Pacific region this year to 4.2 percent — 0.7 percentage points lower than it expected in April, and well below the region’s 6.5 percent growth last year.
The fund also cut its forecast for the area for next year to 4.6 percent, down by 0.5 percentage points.
Much of the downgrade reflects the ongoing spillover from shocks including Russia’s invasion of Ukraine, China’s economic slowdown and rising global interest rates.
Photo: AFP
“Risks that we highlighted in our April forecast — including tightening financial conditions associated with rising central bank interest rates in the United States and commodity prices surging because of the war in Ukraine — are materializing,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, wrote in a blog post on Thursday. “That in turn is compounding the regional growth spillovers from China’s slowdown.”
China is tipped to expand by 3.3 percent, the IMF said, down from its 4.4 percent growth projection in April.
The IMF expects the world’s second-largest economy to record 4.6 percent growth next year, a reduction of 0.5 percentage points that reflects the hit from China’s “zero COVID-19” policy and a real-estate slump.
The IMF added that there would be sizable spillovers on regional trading partners.
“Japan and [South] Korea, the two largest regional economies integrated closely with global supply chains and China, will also see growth slow on weaker external demand and disruptions to supply chains,” Srinivasan wrote.
Increased trade policy uncertainty and a fraying of supply chains are also “expected to delay the economic recovery and exacerbate scarring from the pandemic in Asia,” Srinivasan wrote. “While growth is weakening, Asian inflation pressures are rising, driven by a global surge in food and fuel costs resulting from the war and related sanctions.”
Still, the IMF noted some signs of a rebound in economic activity in the region as some pandemic restrictions on mobility are gradually eased.
“The resilience of manufacturing and rebound in tourism is supporting a gradual rebound in Malaysia, Thailand and the Pacific island countries,” Srinivasan wrote.
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