China : growth 8.0% this year but recovery 'unbalanced'
Oct 19 Reuters - The International Monetary Fund said on Tuesday that this year's economic growth forecast for Asia was changed so that a fresh wave of COVID 19 infections, supply chain disruptions and inflation pressures pose downside risks to the outlook.
China's economy will grow this year by 8.0% and 5.6% in 2022, but the recovery remains unbalanced as repeated coronavirus outbreaks and fiscal tightening weigh on consumption, it said.
Any untimely policy normalization or misinterpreted policy communications by the IMF could also trigger significant capital outflow and higher borrowing costs for Asian emerging economies, the Federal Reserve said.
In its regional outlook report the IMF cut the economic growth forecast for Asia to 6.5% this year, down 1.1 percent point from its projection for April as a spike in Delta variant cases hit consumption and factory output.
The IMF raised its Asia growth forecast for 2022 from 4.7% estimate in April to 5.7%, reflecting progress in vaccinations.
Although Asia and Pacific remains the fastest growing region in world, the divergence between Asian developed economies and emerging market & developing economies is furthering, the report said.
Risks are tilted to the downside, it said, mainly on uncertainty about the pandemic, supply chain disruption and potential spillovers from policy normalisation in the United States.
China's economy hit the slowest pace of growth in the third quarter of this year, highlighting the challenge policymakers face as they seek to rein in the real estate sector while strengthening the economy and export sectors.
India is expected to grow 9.5% this year, while advanced economies like Australia, South Korea, New Zealand and Taiwan benefit from high-tech and commodity booms, the IMF said.
But ASEAN - 5 countries - Indonesia, Malaysia, Philippines, Singapore, Thailand - face severe challenges from a resurgent virus and weakness in service consumption, it said.
Over the next few months, new infection waves remain the biggest concern, says the IMF.
While inflation expectations are generally well-anchored in Asia, persistent commodity prices and shipping costs, coupled with higher disruption of global value chains, are amplifying concerns over higher inflation.
Most emerging economies must maintain monetary support to ensure a lasting recovery, but central banks should be prepared to act quickly if the recovery strengthens faster than expected or if inflation expectations increase, it said.