The IMF boosted its growth forecast for Asia this year, reflecting a rosier outlook for the region’s two largest economies and flagging a possible upward revision in its outlook for China.
Asia is set to expand 4.5 percent this year from the prior year, 0.3 percentage points higher than the October regional outlook but a slowdown from last year’s 5 percent pace, according to the IMF report on Tuesday.
The IMF raised its forecast for Taiwan’s GDP growth for this year to 3.1 percent, up 0.1 percentage points from its October estimate and the highest among advanced economies in Asia.
Photo: Reuters
The IMF cut its projection for Taiwan's economy next year by 0.1 percentage points to 2.7 percent.
The latest data has taken into account the higher forecast for India published earlier this month and China’s pace, on the back of expectations that government stimulus will boost growth. On China, the IMF said first-quarter growth came in stronger than expected on robust exports and manufacturing demand, which may prompt another upward revision.
“Global disinflation and the prospect of lower central bank interest rates have made a soft landing more likely, hence risks to the near-term outlook are now broadly balanced,” IMF’s Asia and Pacific department director Krishna Srinivasan wrote in a blog post.
China’s central government has ramped up spending this year to support an economy still reeling from a weakened property sector and to propel growth to its target near 5 percent this year. In India, the government ramped up capital spending by a third for this year, the third year in a row.
China’s real GDP is seen expanding 4.6 percent this year from the prior year, and India to rise 6.8 percent this year, the IMF said. Officials left next year's regional outlook unchanged at a 4.3 percent advance.
Several risks remain, the IMF said. Chief among them is a long-term property sector downturn in China, which would weaken demand and prolong deflation. Other challenges include growing fiscal deficits and risks to trade from US-China tensions.
Officials also warned Asian nations of pinning too much on expectations for the US Federal Reserve’s path when deciding their own monetary policy. Indonesia this month unexpectedly raised interest rates to address a currency walloped by a strengthening US dollar. Southeast Asia’s largest economy is among many countries in the region contending with currency depreciation as the prospects of early Fed rate cuts wane.
While following the Fed “could limit exchange rate volatility” but “it risks that central banks would fall behind (or move ahead of) the curve and destabilize inflation expectations,” Srinivasan wrote.
Additional reporting by staff writer
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