IMF: Asia Growth Improving But Now Forecast Lower Improvement

October 13th, 2012
in econ_news, syndication

Econintersect: The International Monetary Fund (IMF) is forecasting improving growth for Asia, but at lower levels than previously forecast:

Growth in the Asia-Pacific region has slowed. External headwinds played a major role, as the recovery in advanced economies suffered setbacks. Weaker momentum in China and India also weighed on regional economies. For Asia as a whole, GDP growth fell to its lowest rate since the 2008 global financial crisis during the first half of 2012. With inflationary pressures easing, macroeconomic policy stances remained generally supportive of domestic demand and in some cases were eased further in response to the slowdown.

Follow up:

More broadly, financial conditions remain accommodative, and capital inflows have resumed. Going forward, growth is projected to pick up very gradually, and Asia should remain the global growth leader, expanding over 2 percentage points faster than the world average next year. However, considerable downside risks remain, in particular with regard to the euro area crisis. The priorities for policymakers are to support noninflationary growth, maintain financial stability, and remain responsive to weaker-than-expected outcomes. Refocusing structural and fiscal reform efforts toward sustained and more inclusive growth remains a priority.

Growth in Asia has been somewhat lower than previously projected on setbacks to the global recovery.

Although a rebound from earlier natural disaster disruptions helped spur growth in the first quarter of 2012, that activity has now slowed markedly. Adverse trade spillovers from weakness in the euro area and beyond have taken their toll on Asian exports. For Asia as a whole, real GDP growth averaged 5½ percent (year over year) in the first half of 2012, well above the global average, but the lowest rate since the 2008 global financial crisis. Domestic factors also contributed to the slowdown in China and especially in India, reflecting deliberate efforts to engineer a soft landing in the former and weakening investor sentiment adding to supply constraints in the latter. In Japan, a slowdown in consumption drove the recent deceleration in growth after the policy-driven pickup in early 2012. Several Association of Southeast Asian Nations (ASEAN) economies, led by Indonesia, Malaysia, the Philippines, and Thailand, have bucked regional trends, with growth remaining close to potential, in part supported by public investment. Australia has also weathered global headwinds relatively well, in particular as mining-related investment expanded strongly.

Read the entire IMF report

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