IMF Decreases Economic Forecast on Asia

The International Monetary Fund (IMF) has decreased their economic forecast for Asia due to China’s slowdown, global monetary tightening, and the Ukraine – Russia war triggering rising inflation.

Despite inflation in Asia being relatively subdued compared to other regions, the majority of central banks should maintain rising interest rates to guarantee inflation expectations are not de-anchored mentioned by the IMF.

“Asia’s strong economic rebound early this year is losing momentum, with a weaker-than-expected second quarter,” mentioned the Director of IMF’s Asia and Pacific Department, Krishna Srinivasan.

“Further tightening of monetary policy will be required to ensure that inflation returns to target and inflation expectations remain well anchored.”

The IMF cut the growth forecast for Asia to 4.0% this year, and 4.3% for 2023, down by 0.9% and 0.8 points in April respectively. This slowdown comes after a 6.5% 2021 expansion.

“As the effects of the pandemic wane, the region faces new headwinds from global financial tightening and an expected slowdown of external demand,” mentions the report.

Headwinds cited were China’s fast and wide economic slowdown due to the COVID-19 pandemic lockdowns and its property woes says the IMF.

“With a growing number of property developers defaulting on their debt over the past year, the sector’s access to market financing has become increasingly challenging,”

“Risks to the banking system from the real estate sector are rising because of substantial exposure.”

Source: Business World