The IMF yesterday maintained its GDP growth forecast for Taiwan this year at 2.1 percent, as the nation’s export-oriented economy is taking a hit from a downturn in the global technology cycle.
Inventory adjustments would erode growth in Taiwan and South Korea, both of which had already performed disappointingly in the fourth quarter of last year, the IMF said on its Web site.
However, Asia and the Pacific would be relative bright spots amid a rocky global recovery, and would contribute to 70 percent of the world’s growth this year, driven by a buoyant outlook for China and India, the IMF said.
Photo: EPA-EFE
The two largest emerging economies are expected to contribute half of global growth, with the remainder of the region contributing an additional 20 percent, it said.
As in the rest of the world, domestic demand is expected to be the largest growth driver across Asia and the reopening of the Chinese economy would be key for the region, the IMF said.
The spillover from higher consumption in China to the rest of Asia is estimated to be larger than from other growth drivers, such as investment, it said, adding that the near-term effects would vary between countries.
However, Asian policymakers still face several challenges, such as bringing inflation back to target, stabilizing public and private debt, safeguarding financial stability and improving long-term growth potential, the IMF said.
“Central bankers in Asia should hold a tighter stance for longer to prevent de-anchoring of inflation expectations... The costs of failing to bring inflation below target are likely to outweigh any benefits from keeping monetary conditions loose,” the IMF said.
An integrated policy response using all available tools would be needed to manage global shocks, it said.
While Asia’s financial systems have not been affected in any major way following recent banking turmoil in the US and Europe, they need to be carefully monitored given high leverage among households and corporations, it said.
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