Macron’s win is ‘good news’ for trade-reliant Asia: IMF

SINGAPORE: Emmanuel Macron’s victory in the French presidential election is “good news” for trade-reliant Asia as it eases fears of rising protectionism in Europe, the International Monetary Fund (IMF) said Tuesday.

Changyong Rhee, director of the fund’s Asia and Pacific Department, said Macron’s win over far-right candidate Marine Le Pen, an economic nationalist, had made him more optimistic that major trade tensions would ease.

“I think the result of the French elections really show that it is good news to open trade and globalization and it reduces the uncertainties of the euro zone,” Rhee said.

The IMF’s latest economic outlook had flagged increasing protectionism in Asia’s major trading partners and tightening global financial conditions as key downside risks to regional growth.

The IMF also called on Asian economies to learn from Japan’s experience and act early to cope with rapidly aging populations, warning that parts of the region risk “getting old before becoming rich.”

Asia has enjoyed substantial demographic dividends in the past decades, but the growing number of elderly is set to create a demographic “tax|” on growth, the IMF said in its economic outlook report.

“Adapting to aging could be especially challenging for Asia, as populations living at relatively low per capita income levels in many parts of the region are rapidly becoming old,” the report said. “Some countries in Asia are getting old before becoming rich.”

The population growth rate is projected to fall to zero for Asia by 2050 and the share of working-age people — now at its peak — will decline over the coming decades, the report said. The share of the population aged 65 and older will increase rapidly and reach close to two-and-a-half times the current level by 2050, it said.

That means demographics could subtract 0.1 percentage point from annual global growth over the next three decades, the report said. The challenges are particularly huge for Japan, which faces both an aging and shrinking population. Its labor force shrank by more than 7 percent in the past two decades, the IMF said.

“Japan’s experience highlights how demographic headwinds can adversely impact growth, inflation dynamics and the effectiveness of monetary policy,” the report said.

The IMF called on Asian nations to learn from Japan’s experience and deal with demographic headwinds early, such as by introducing credible fiscal consolidation plans, boosting female and elderly labor force participation and revamping social safety nets.