"Asia remains the most dynamic part of the global economy but is facing severe headwinds from a still weak global recovery, slowing global trade, and the short-term impact of China's growth transition," the IMF said.
The International Monetary Fund (IMF) logo is seen at the IMF
headquarters building during the 2013 Spring Meeting of the
International Monetary Fund and World Bank in Washington, April 18,
2013. REUTERS/Yuri Gripas
HONG KONG: China and Japan's economies are expected to slow
sharply over the next two years but Asian growth will remain strong as
domestic demand takes up the slack from weak global trade, the IMF said
Tuesday.
Government stimulus measures, lower commodity prices and low
unemployment will help drive regional expansion, the International
Monetary Fund said, and called on leaders to push on with reforms.
However, in its Regional Economic Outlook for Asia and the
Pacific, the Fund also warned of several external challenges, from
weakness in advanced economies, weak global trade and increasingly
volatile global financial markets.
Since its previous outlook on the region in October, global
markets have seen wild volatility, with worries over China's economy and
plunging oil prices hammering shares in January and February, wiping
trillions off valuations. While there has been a slight recovery since
March, investors remain on edge.
"Asia remains the most dynamic part of the global economy
but is facing severe headwinds from a still weak global recovery,
slowing global trade, and the short-term impact of China's growth
transition," the Fund said.
"To strengthen its resilience to global risks and remain a
source of dynamism, policymakers in the region should push ahead with
structural reforms to raise productivity and create fiscal space while
supporting demand as needed."
The Fund predicted growth in Asia to come in at 5.3 percent this year and next, down from its previous forecast of 5.4 percent.
China's economy, the world's second biggest and a crucial
driver of global growth, is tipped to expand 6.5 per cent this year -
the lower end of Beijing's target - and 6.2 per cent in 2017.
The figures are well down from the 6.9 per cent seen in
2015, which was the slowest rate in a quarter of a century, but slightly
better than the IMF's October outlook.
The Fund noted China's leadership is trying to transform the
country's growth driver away from a reliance on government investment
and exports to one dominated by domestic consumption.
JAPAN TIPPED FOR RECESSION
It also warned of the spillover effects of China's slowing
growth on other economies that rely on the country to drive their own
expansion, including weaker trade and commodity prices.
"Overall, the region has become more sensitive to the Chinese economy," it said.Japanese growth is tipped to slow, with the Fund saying exporters would be hit by the strengthening yen - which is at 18 month highs against the dollar - and slowing trade with China.
It halved its growth outlook for Japan to 0.5 per cent in 2016 and tipped it to shrink 0.1 per cent owing to an expected consumption tax rise, while it also cited the long-running problem of an ageing population and a huge debt mountain.
The lower outlook comes days after the Bank of Japan refused to ramp up its stimulus programme despite a string of weak data that have raised questions about Prime Minister Shinzo Abe's faltering drive to kickstart growth.
The report said India would grow 7.5 per cent this year and
next, unchanged from its previous prediction and the fastest rate among
the world's big economies, as low oil prices, government investment and a
pick-up in domestic consumption offset weak exports.
In South Korea, growth was forecast to rise to 2.7 per cent this year
and to 2.9 per cent in 2017 - up from 2.6 per cent in 2015 and again
boosted by domestic demand. Australia's growth is expected to remain
stable at 2.5 per cent in 2016 and pick up in 2017.
- AFP/sk
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