In­dia, Ja­pan to drive Asia as China slows: IMF


Faster growth un­der the re­formist gov­ern­ments of In­dia and Ja­pan will help cush­ion the blow to the world econ­omy from a marked slow­down in China, the In­ter­na­tional Mon­e­tary Fund pre­dicted Tues­day.

As a whole, the world’s most pop­u­lous re­gion will con­tinue to build up its share of the global econ­omy, the IMF said in its lat­est World Eco­nomic Out­look re­port.

“Asia’s growth is fore­cast to hold steady in 2015, and the re­gion is ex­pected to con­tinue out­per­form­ing the rest of the world over the medium term,” it said.

The re­port comes as China grap­ples with growth slump­ing to lev­els not seen in al­most a quar­ter of a cen­tury.

Much of that slow­down from the break­neck growth of years past has been de­lib­er­ately en­gi­neered by Bei­jing, as the gov­ern­ment re­po­si­tions the econ­omy to a more sus­tain­able path.

But it leaves global ex­pan­sion more re­liant on the likes of In­dia and Ja­pan, with the United States and Europe still strug­gling to shake off their tor­por.

The IMF said that un­der re­forms by In­dia’s new busi­ness-friendly gov­ern­ment of Prime Min­is­ter Naren­dra Modi, the coun­try was ex­pected to ex­pand at a much faster pace than pre­vi­ously ex­pected.

Modi swept to power last year on a pledge to re­vive In­dia’s flag­ging for­tunes, and the IMF said his new broom should sweep in growth of 7.5 per­cent this year and next — mak­ing it the world’s fastest grow­ing ma­jor econ­omy.

That was a sharp in­crease on past IMF pre­dic­tions, which had put growth at 6.3 per­cent in 2015 and 6.5 per­cent next year.

It com­pared with the re­port’s ex­pec­ta­tion for China’s gross do­mes­tic prod­uct (GDP) to grow 6.8 per­cent this year and 6.3 per­cent in 2016.

South Korea Stalls

The 2015 rate, which is in line with a pro­jec­tion by econ­o­mists in an AFP sur­vey, would be the slow­est since 1990 when the Chi­nese econ­omy was ham­mered by for­eign sanc­tions af­ter the Tianan­men Square crack­down.

How­ever, the IMF said “on­go­ing im­ple­men­ta­tion of struc­tural re­forms and lower com­mod­ity prices are ex­pected to ex­pand con­sumeror­i­ented ac­tiv­i­ties, par­tially buffer­ing the slow­down.”

The IMF up­graded its view for Ja­pan, but warned that the pros- pects for a de­ci­sive break from years of re­ces­sion and de­fla­tion hinged on deeper struc­tural re­forms by Prime Min­is­ter Shinzo Abe.

Ja­pan’s growth is seen at 1.0 per­cent this year and 1.2 per­cent in 2016 — both more than dou­ble from the last out­look’s fore­casts.

But should things turn worse than ex­pected in both China and Ja­pan, that would re­ver­ber­ate world­wide “given th­ese economies’ large size and deep trade and fi­nan­cial link­ages with other na­tions.”

The risks, it said, were fail­ure to im­ple­ment cru­cial re­forms in China and Ja­pan not mak­ing struc­tural changes.

In South Korea, “mo­men­tum has stalled some­what,” the Fund said, adding that this re­flected “frag­ile house­hold and in­vestor sen­ti­ment.”

Its fore­cast of 3.3 per­cent growth this year was based on “the as­sump­tion that sup­port­ive mon­e­tary and macro­pru­den­tial poli­cies and more fa­vor­able terms of trade spur a re­bound in ag­gre­gate de­mand.”

In Australia a down­turn in global com­mod­ity prices is “ex­ac­er­bat­ing the long-an­tic­i­pated decline in re­source-re­lated in­vest­ment.” How­ever, the IMF added that record­low in­ter­est rates will help non­re­source sec­tors.

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