- The International Monetary Fund forecasts that Asia-Pacific gross domestic product will grow 4.6% in 2023, after growing 3.8% in 2022.
- China and India are expected to contribute about half of global growth this year, while the rest of Asia and the Pacific region will contribute another fifth.
BEIJING, CHINA – APRIL 29: Beijing South Railway Station is seen on Saturday April 29, 2023 in Beijing.
Anadolu Agency | Anadolu Agency | Getty Images
The International Monetary Fund raised its forecast for Asia-Pacific, saying the region’s growth will be primarily driven by China’s recovery and “resilient” growth in India. This is happening as the rest of the world braces for slower growth due to tighter monetary policy and Russia’s invasion of Ukraine.
The organization forecasts that Asia-Pacific gross domestic product will grow 4.6% this year, up 0.3 percentage points from October’s forecast, according to the May regional economic outlook released on Tuesday.
The region’s two largest emerging economies are expected to contribute around half of global growth this year.
IMF
The IMF’s improved outlook would mean the region would contribute around 70% to global growth, it said. The region grew by 3.8% in 2022.
“Asia and the Pacific will be the most dynamic of the world’s major regions in 2023, driven largely by bright prospects for China and India,” the IMF said in its report.
“The region’s two largest emerging markets are expected to contribute about half of global growth this year, with the rest of Asia and the Pacific an additional fifth,” it said.
On a country basis, the organization upgraded its growth prospects for China, Malaysia, the Philippines and Laos to 5.2%, 4.5%, 6% and 4%, respectively.
While trimming its forecast for India’s full-year growth, the IMF still expects the economy – which is on the verge of becoming the world’s most populous country – to grow 5.9% in 2023.
Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, suggested that central banks in the region will monitor price stability.
“We believe core inflation is stubborn and central banks need to watch inflation and address the issue head-on, so let’s say ‘longer higher’ for Asia,” Srinivasan told CNBC’s Street Signs Asia.
Despite the general optimism for the region – mainly due to a rosier outlook for emerging markets – the IMF has downgraded its forecasts for Japan, Australia, New Zealand, Singapore and South Korea.
“Stronger external demand from China will provide some breathing space for advanced economies in the region but is expected to be largely offset by drag from other domestic and external factors,” she said, adding that growth in Asia outside of China and India is “expected will hit rock bottom in 2023.”
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It lowered Japan’s growth estimates for 2023 to 1.3% to reflect “weaker foreign demand and investment and carry-over from disappointing growth in the last quarter of 2022.”
Weakening domestic demand in Australia and New Zealand due to central bank tightening is also likely to “dampen” growth prospects this year to 1.6% and 1.1% respectively, it said.
“Inflationary pressures in Asia’s advanced economies are expected to be more persistent than projected in the October 2022 World Economic Outlook, as wage growth has recently become more evident in Australia, Japan and New Zealand,” the IMF said in its report.
High consumption in China is likely to spill over into the rest of Asia-Pacific, the IMF said, adding that China’s reopening after most of its tough Covid restrictions are lifted “will result in a surge in private consumption that will fuel China’s growth recovery.” becomes. “
This effect is expected to outperform other growth drivers such as investment.
The short-term economic impact of China’s recovery will “likely vary from country to country, with those more reliant on tourism likely to benefit the most,” she said, noting that a surge in Chinese imports is likely to happen on the will be reflected most strongly in the services.
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The IMF said Asia-Pacific economies could also see knock-on effects from China’s ongoing geopolitical tensions. The organization previously estimated that global tensions could disrupt foreign investment and lead to a long-term loss of 2% of world gross domestic product.
“The risks of further fragmentation of world trade are becoming increasingly evident amid ongoing US-China trade disputes (including new restrictions on trade in high-tech products) and rising geopolitical tensions surrounding Russia’s war in Ukraine,” it said.