IMF raises 2023 economic outlook for Asia, sees China and India accounting for half of global growth


BEIJING, CHINA – APRIL 29: Beijing South Railway Station is seen on Saturday, April 29, 2023 in Beijing.

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The International Monetary Fund raised its forecast for Asia-Pacific, saying the region’s growth will be driven mainly by China’s recovery and “resilient” growth in India. It comes when the rest of the world is ready for it slow growth From tighter monetary policy and Russia’s invasion of Ukraine.

The organization forecast Asia-Pacific’s GDP to expand 4.6% this year, up 0.3 percentage points from its forecast in October, according to its May regional economic outlook. Released on Tuesday.

The region’s two largest emerging market economies are expected to contribute nearly half of global growth this year.

International Monetary Fund

The IMF’s enhanced outlook would mean that the region would contribute about 70% to global growth, it said. The sector is expected to expand by 3.8% in 2022.

“Asia and the Pacific will be the most dynamic of the world’s major regions in 2023, driven primarily by the bullish outlook for China and India,” the IMF said in its report.

It added, “The two largest emerging market economies in the region are expected to contribute nearly half of global growth this year, with the rest of Asia and the Pacific contributing an additional fifth.”

On a country basis, the organization raised its growth outlook for China, Malaysia, the Philippines, and Laos to 5.2%, 4.5%, 6%, and 4%, respectively.

Although it lowered its forecasts for India’s full-year growth, the IMF still expects the economy – which on the verge of becoming the most populous country in the world – To expand to 5.9% in 2023.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, suggested that central banks in the region monitor price stability.

“We believe core inflation is sticky, central banks need to keep their eye on inflation and address the problem, so what we’re saying is for Asia,” Srinivasan told CNBC’s “Street Science Asia.” The higher the longer’.”

slow advanced economies

Despite overall optimism for the region – mostly due to an improved outlook for emerging markets – the IMF downgraded its predictions for Japan, Australia, New Zealand, Singapore and South Korea.

“Strong external demand from China will provide some relief to advanced economies in the region, but is expected largely from other domestic and external factors,” it said, adding growth in Asia outside China and India is “expected” through 2023. In to bottom out.”

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It also lowered Japan’s 2023 growth forecast to 1.3% to reflect “weak external demand and investment and carryover from disappointing growth in the final quarter of 2022”.

The hardening of central banks in Australia and New Zealand is also expected to “undermine growth prospects” this year to 1.6% and 1.1% respectively, weakening domestic demand.

In its report, the IMF said, “Inflationary pressures in the advanced economies of Asia are expected to be more persistent than projected in the October 2022 World Economic Outlook, as wage growth has recently become more pronounced in Australia, Japan and New Zealand.” “

spillover from china

The IMF said higher consumption in China is likely to spread to the rest of the Asia-Pacific, adding that after China lifts most of its stringent Covid restrictions “it will result in a pickup in private consumption that will boost China’s growth”. Will give.

This effect is expected to exceed other growth drivers such as investment.

The near-term economic impact of China’s recovery “is likely to vary across countries, with those more reliant on tourism likely reaping the most,” it said, noting that growth in China’s imports was most likely in services. will be reflected more strongly.

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The IMF said that Asia-Pacific economies could also see an impact from the ongoing geopolitical tensions in China. The organization had earlier predicted that global tensions could hamper foreign investment and further long term loss of 2% of the world’s gross domestic product.

“Given US-China trade disputes (including new restrictions on trade in high-tech products) and geopolitical tensions linked to Russia’s war in Ukraine, risks of global trade fragmentation are becoming more prominent,” it said.

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