Asian economies will probably ease “substantially” as a global slowdown erodes demand for their exports, consumer confidence falters and banks restrain lending amid the credit crunch, the IMF said.
Growth in Asia including Japan, Australia and New Zealand will probably slow to 4.9 percent next year, from a 5.6 percent pace predicted last month, the Washington-based lender said in a report on Monday. The economies, which grew 7.6 percent last year, could expand 6 percent this year, the IMF said.
“Asia is being rattled by the crisis as a result of its close trade and financial integration with the rest of the world and any hope that the region would escape the crisis unscathed has by now evaporated,” it said. “It remains unclear how domestic demand would stand up to a sharp decline in export growth and tighter financial conditions.”
The IMF this month lowered its global economic growth forecasts and predicted the first simultaneous contraction in the US, Japan and euro region since World War II. The worldwide slump has prompted policy makers to cut lending rates, announce spending packages and cut taxes to sustain growth.
China, India, South Korea, Taiwan and Vietnam are among countries in the region that have lowered borrowing costs in recent weeks.
“With inflation projected to moderate, monetary policy in most countries has room to ease to stabilize financial conditions and provide support to address significant downside risks,” the IMF said. “Greater exchange-rate flexibility in some cases will provide more monetary-policy autonomy and help mitigate the impact of volatile capital flows.”
China will expand 8.5 percent next year, slower than a previous forecast of 9.3 percent, the IMF said. India’s growth is estimated to be 6.3 percent next year, down from an earlier prediction of 6.9 percent, the report showed.
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