Risks seen from global fi­nan­cial tight­en­ing and ris­ing trade pro­tec­tion­ism

New Straits Times - - Business -


THE In­ter­na­tional Mon­e­tary Fund (IMF) said Asia’s eco­nomic out­look faces “sig­nif­i­cant” un­cer­tainty and down­side growth risks from any sud­den tight­en­ing in global fi­nan­cial con­di­tions or rise in pro­tec­tion­ist trade poli­cies.

The IMF, which in April raised its this year’s Asia-Pa­cific growth fore­cast to 5.5 per cent from its pre­vi­ous Oc­to­ber fore­cast of 5.4 per cent, said loose mon­e­tary and fis­cal poli­cies across most of the re­gion would un­der­pin do­mes­tic de­mand.

“How­ever, the near-term out­look was clouded with sig­nif­i­cant un­cer­tainty, and risks, on balance, re­main slanted to the down­side,” said the IMF in its Asia-Pa­cific re­gional eco­nomic out­look re­leased yes­ter­day.

Last month, the IMF kept the re­gion’s next year’s growth fore­cast un­changed at 5.4 per cent. Asia-Pa­cific recorded 5.3 per cent growth last year.

The re­port comes at a time when pol­i­cy­mak­ers around the re­gion are wrestling with the chal­lenge of how to nav­i­gate ris­ing risks of pro­tec­tion­ism un­der United States Pres­i­dent Don­ald Trump, and a po­ten­tial in­crease in fund­ing costs as the United States Fed­eral Re­serve steps up the pace of rate hikes.

“A pos­si­ble shift to­wards pro­tec­tion­ism in ma­jor trad­ing part­ners rep­re­sents a sub­stan­tial risk to the re­gion. Asia was par­tic­u­larly vul­ner­a­ble to a decline in global trade be­cause the re­gion has a high trade open­ness ra­tio, with sig­nif­i­cant par­tic­i­pa­tion in global sup­ply chains,” said IMF.

Em­manuel Macron’s vic­tory in France’s pres­i­den­tial elec­tion was “good news” for open trade and glob­al­i­sa­tion, said Changy­ong Rhee, direc­tor of the IMF’s Asia and Pa­cific Depart­ment.

Rhee said he hopes a re­cent agree­ment be­tween Trump and China’s Pres­i­dent Xi Jin­ping on a 100-day plan for trade talks would lead to ex­panded global trade rather than a re­duc­tion.

Con­tin­ued tight­en­ing of global fi­nan­cial con­di­tions could trig­ger volatil­ity in cap­i­tal flows, and the re­gion could see large spillovers if China’s shift to a more con­sump­tion-driven econ­omy proves bumpier than ex­pected, said the IMF.

Rhee re­it­er­ated that the IMF may need to up­grade its China growth fore­cast this year from 6.6 per cent af­ter the econ­omy ex­panded more than ex­pected in the first quar­ter, though he said there are con­cerns about whether strong credit growth is be­ing al­lo­cated ef­fi­ciently. Reuters


The IMF may need to up­grade its China growth fore­cast this year from 6.6 per cent af­ter the econ­omy ex­panded more than ex­pected in the first quar­ter.

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