Asia’s growth forecasts have been cut by the International Monetary Fund (IMF) which predicts rising inflation and central bank tightening will hold back the region into next year.
The IMF downgrade underscores heightening uncertainty over Asia’s recovery from the Covid-19 pandemic as darkening growth prospects for the United States, China and the euro zone economies stoke fear of a global recession.
Monetary policy divergence from steady US interest rate hikes is likely to continue strengthening the dollar, worsening emerging economies’ debt woes and forcing some to further raise rates to avoid their currencies from falling too much, the IMF said in its World Economic Outlook report.
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“A widening debt crisis in [emerging] economies would weigh heavily on global growth and could precipitate a global recession. Further US dollar strength can only compound the likelihood of debt distress,” it said.
The IMF now expects emerging Asian economies to grow 4.4% this year and 4.9% in 2023, down 0.2 percentage point and 0.1 point, respectively, from its projections in July, after a 7.2% expansion in 2021.
The cut largely reflects a downgrade for growth in China to 3.2% this year from an 8.1% expansion in 2021, a result of the country’s strict Covid-19 lockdowns and its worsening property market crisis, the IMF said.
The world’s second-largest economy is expected to see growth rebound to 4.4% in 2023, down 0.2 point from the IMF’s forecast in July.
The Association of Southeast Asian Nations economies of Indonesia, Malaysia, the Philippines, Singapore, and Thailand (ASEAN-5) are expected to expand 5.3% this year from growth of 3.4% in 2021, the IMF report said.
ASEAN Economies Weighed by Food Prices
Growth was projected to slow to 4.9% in 2023 due to weaker demand in major trading partners such as China, the euro area and the United States.
The ASEAN economies may also see growth weighed by higher food and energy prices, which sap households’ purchasing power, and rapid monetary tightening to hold back inflation, it said.
The IMF expects Japan’s economy to grow 1.7% this year, unchanged from its projection in July, and 1.6% in 2023, down 0.1 point.
Japan’s downgrade for 2023 reflects an expected weakening of consumption blamed on rising inflation and slow wage growth, the report said.
- Reuters with additional editing by Sean O’Meara
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