SINGAPORE, April 30 — The International Monetary Fund (IMF) has improved its Asia and Pacific region growth forecast to 4.5 per cent this year, up 0.3 points from the previous projection in October, partially due to carryover from stronger 2023 outturns and policy support.
The United Nations agency said the region remains inherently dynamic and will contribute about 60 per cent of global growth this year.
The growth forecast for Asia and the Pacific in 2025 will moderate to 4.3 per cent, unchanged from the October projection, with the structural slowdown in China a key factor.
IMF also improved its 2024 outlook for Malaysia to 4.4 per cent, up 0.1 percentage point from the previous projection.
“Drivers of growth are as diverse as the region, reaching from resilient domestic consumption in most Asean countries to strong public investment in China, and most notably, in India, and to a sharp uptick in tourism in the Pacific Island countries,” said IMF’s Asia and Pacific Department director Krishna Srinivasan.
He was speaking during a hybrid press conference on the release of “The Regional Economic Outlook, Asia and Pacific: Steady Growth Amid Diverging Prospects” report today.
The IMF also projects that inflation will converge on central bank targets by the end of 2024 in most of the region, and output gaps are also expected to narrow, conditional on macroeconomic policies staying the course.
“Disinflation has advanced throughout the region albeit at different speeds. In some countries, it remains above target, like in Australia and in New Zealand.
“In others, it is at or closer to central bank targets, for example, in emerging markets and Japan, while in some, there are risks of deflation like Thailand and China,” he said.
Meanwhile, China continues to pose risks to the macroeconomic outlook in the region, both on the upside and the downside.
Against this backdrop, Srinivasan said policies aimed at addressing stresses in the property sector and boosting domestic demand will help China and the region, while sectoral policies contributing to excess capacity will hurt both.
As such, Asian central banks should continue to focus on domestic price stability and avoid making policy decisions overly dependent on anticipated interest rate moves by the United States Federal Reserve as they are now better placed than before to cope with exchange rate movements.
“They should continue to allow the exchange rate to act as a buffer against shocks,” he said.
Meanwhile, in a related IMF blog post, Srinivasan said Asian governments need to pursue policies to reduce debt and deficits more urgently, as progress last year fell behind what the agency had originally projected.
“Our forecasts show that on current fiscal plans, debt ratios would stabilise for most economies, provided governments underpin these plans with concrete policies and follow through on them.
“But even then, debt would remain significantly higher than it was before the pandemic,” he said.
To reduce debt levels and curtail debt service costs, governments need to streamline expenditures and, especially, raise more revenue.
Policymakers should also be cautious about aggravated trade frictions, as global conflict poses additional risks to trade. This is evidenced by the rerouting of ships around Africa to avoid the Red Sea, which raises shipment costs.
“For Asia’s economies, these are unfortunate developments, as many of them are deeply integrated into global supply chains and benefit greatly from trade.
“Pacific (Ocean) island countries are especially affected, as they are highly dependent on imports and poorly integrated into global shipping networks,” Srinivasan said.
— Bernama
