IMF cuts Asian economic forecasts as China slowdown bites

TOKYO – The International Monetary Fund (IMF) cut its economic forecasts for Asia on Friday China’s sharp slowdown It has dampened the outlook for the region’s recovery.

Inflation in Asia remains subdued compared to other regions, but most central banks will need to keep raising rates to avoid destabilizing inflation expectations, the IMF said in its Asia-Pacific economic outlook report. Stated.

Dr. Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, said:

“Further tightening of monetary policy will be necessary to return inflation to target and keep inflation expectations stable,” he said.

The IMF has cut its forecast for Asian growth to 4% this year, down from 4.9% in April. Growth is also expected to slow to 4.3% next year from 5.1% previously. The slowdown follows his 6.5% expansion in 2021.

“As the effects of the pandemic wane, the region is facing new headwinds from tightening global monetary policy and an expected slowdown in external demand,” the report said.

Among the biggest headwinds is a rapid and widespread economic slowdown in China as a result of the strict lockdown due to Covid-19. property problems worsened, the IMF said.

“The growing number of property developers that have defaulted over the past year has made it increasingly difficult for the sector to access funding from the market,” the report said.

“Risks to the banking system from the real estate sector are heightened due to significant exposures.”

The IMF expects China’s growth to slow to 3.2% this year after rising 8.1% in 2021, down 1.2 percentage points from its April forecast. 2024.

As emerging economies in Asia are forced to raise interest rates to avoid rapid capital outflows, ‘wise’ use of foreign exchange intervention could help ease the burden of monetary policy in some countries. there is, said the IMF.

“This tool could be particularly useful in shallower foreign exchange markets in Asia, such as the Philippines, or where currency mismatches in bank and corporate balance sheets increase exchange rate volatility risk, such as in Indonesia. ‘ said the IMF.

“Foreign exchange interventions must be temporary to avoid side effects from continued use, which may include increased risk-taking in the private sector.” Reuters