The International Monetary Fund (IMF) on Tuesday slashed this year’s economic growth forecast for Asia and warned that a fresh wave of COVID-19 infections, supply chain disruptions and inflationary pressures pose downside risks to the outlook. has done.
China’s economy will grow at 8.0 per cent this year and 5.6 per cent in 2022, but the recovery remains “unbalanced” due to repeated coronavirus outbreaks and fiscal tightening on consumption.
The IMF said any “premature policy normalization or mis-policy communication” by the US Federal Reserve could trigger significant capital outflows and higher borrowing costs for Asian emerging economies.
In its Regional Outlook report, the IMF cut this year’s economic growth forecast for Asia to 6.5 percent, 1.1 percentage points lower than its projection made in April, as a spike in delta-type cases slowed consumption and factories. affected the production.
The IMF raised its Asia growth forecast for 2022 to 5.7 percent from 5.3 percent in April, reflecting progress in vaccination.
“While Asia and the Pacific remain the fastest growing regions in the world, the gap between Asian advanced economies and emerging market and developing economies is widening,” the report said.
“Risks are downward sloping,” primarily on uncertainty over the pandemic, supply chain disruptions and potential spillovers from US policy normalization, it said.
China’s economy hit its slowest pace of growth in a year in the third quarter, a challenge policymakers face as they seek to resort to a faltering recovery as the real estate sector recovers.
India is expected to expand by 9.5 per cent this year, the IMF said, while advanced economies such as Australia, South Korea, New Zealand and Taiwan benefit from high-tech and commodity booms.
But ASEAN-5 countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand – still face “serious challenges” from a resurgent virus and weakness in service consumption, it said.
“In the coming months, new infection waves remain the biggest concern,” the IMF said.
While inflation expectations in Asia are “generally well-rested”, higher commodity prices and shipping costs, coupled with continued disruption of global value chains, are raising concerns over persistent inflation.
Most Asian emerging economies must maintain monetary support to ensure a lasting recovery, but central banks “should be prepared to act quickly if the recovery strengthens faster than expected or inflation expectations rise,” it said. said.
(Except for the title, this story has not been edited by NDTV staff and is published from a press release)