The International Monetary Fund (IMF) has revised its forecast for economic growth in Asia and Pacific upwards for the years 2024 and 2025 due to ongoing inflation pressure dissipation. The IMF now predicts that Asia’s economy will expand by 4.5% this year, which is a 0.3 percentage point increase from six months earlier, with forecasts remaining unchanged at 4.3% for the following year. Krishna Srinivasan, Director of Asia and Pacific at IMF, stated that “the outlook for Asia and the Pacific in 2024 has brightened” as a result of this revision.
The upgrade is primarily attributed to China’s policy stimulus, which will provide support according to the organisation. India continues to be identified by the IMF as one of the world’s fastest-growing major economies with public investment remaining an essential driver in its growth story. As Asia’s fifth largest economy, India currently has a GDP worth $3.7 trillion and is aiming for third place globally within six years according to earlier estimates provided by The National Statistic Office of Government of India (NSO).
Strong private consumption will continue driving the growth in other emerging markets across Asia as well, Srinivasan added. Monetary tightening, lower commodity prices and subsiding supply-chain disruptions have contributed significantly to a reduction in inflation despite high demand growth in this region according to IMF’s statement released earlier today.
However, the organisation warns that an extended correction in China’s property sector poses significant risks for Asia’s economy as it could weaken demand and increase chances of prolonged deflation which would have a knock-on effect on other economies through “direct trade spillovers”. The IMF suggests that to mitigate these concerns, China needs an effective policy package comprising the accelerated exit of nonviable property developers, completion of housing projects and managing debt risks for local governments. In March 2021 as well as in October last year, fiscal stimulus helped lessen the adverse impacts arising from a drop in manufacturing activities alongside sluggish service industries according to IMF’s report published today.
Earlier this year, the organisation had predicted that China would grow by 4.6% during 2024, before recently-released data confirmed last year’s expansion rate at precisely five per cent in accordance with official targets for approximately 5%.
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