The International Monetary Fund (IMF) said in a report released on Friday that economic growth in the Asia and Pacific region is expected to slow down in 2022 and 2023.
This reflects headwinds from several aspects, including global financial tightening and the Russia-Ukraine conflict, according to the report.
Asia’s strong economic rebound early this year was losing momentum, with a weaker-than-expected second quarter, said the IMF.
It cut growth forecasts for Asia and the Pacific to four per cent in 2022 and 4.3 per cent in 2023, down by 0.9 and 0.8 percentage points, respectively, compared to the April forecasts.
The levels in April’s outlook were well below the 5.5 per cent average over the last two decades.
However, Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, believed that “Asia remains a relative bright spot in an increasingly dimming global economy.’’
The report said that the United States (U.S.) Federal Reserve had become much more aggressive in tightening its monetary policy.
The U.S. inflation remained stubbornly high.
This had translated into tighter financial conditions for Asia.
Most but not all countries in Asia had seen a deterioration of their terms of trade, and this had been an important factor behind currency depreciations so far this year, it said.
Srinivasan said that for policymakers, further tightening of monetary policy would be required to ensure that inflation returns to target and inflation expectations remain well anchored.
He also suggested that fiscal consolidation was needed to stabilise public debt and support the monetary policy stance.
