IMF raises growth forecast for Asia
Macron’s victory good news for the region
SINGAPORE: The International Monetary Fund forecast yesterday that the Asian economy will expand 5.5% this year, up 0.2 percentage point from last year as the region continues to be the leader of global growth.
Of regional economies, Indonesia is expected to post a 5.1% growth in 2017, up 0.1 point from 2016, while Thailand’s economy is likely to decelerate 0.2 point to 3.0%, according to the IMF’s latest Regional Economic Outlook for Asia and the Pacific.
The report estimated Asian economic growth at 5.4% in 2018, citing accelerating growth in many major advanced and emerging economies — notably the United States — as supporting the region’s positive outlook.
“The signs of growth in the region are encouraging so far,” said Changyong Rhee, director of the IMF’s Asia and Pacific Department. “The policy challenge now is to strengthen and sustain this momentum.”
The upbeat outlook, however, is clouded with uncertainties, such as the possibility of a faster-than-expected pace of US interest rate increases and growing concerns about the rise of protectionism, according to the report.
“A sudden tightening of global financial conditions could adversely impact Asian economies with high external financing needs and weak private sector balance sheets, including by triggering capital outflows and unwinding of productive investment projects,” it said.
“Asian economies are especially vulnerable to protectionism because of their trade openness and integration to global value chains,’’ the report said, in an apparent reference to US President Donald Trump’s “America First” trade policy and Britain’s decision to leave the European Union.
“A global shift toward inward-looking policies could suppress Asia’s exports and reduce foreign direct investment to Asia,” it said.
“Centrist Emmanuel Macron’s victory in France’s presidential election is good news for trade-reliant Asia as it eases fears of rising protectionism in Europe,’’ Rhee told a news conference.
Rhee 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.
“If you asked me this question (on rising protectionism) three to six months ago, I would probably have answered that I am very seriously concerned on the possibility of trade tensions in the global economy,” he told reporters.
“But now I feel a little bit better,” Rhee added, citing a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping last month and Macron’s victory on Sunday.
“I think the result of the French elections really show that it’s good news to open trade and globalisation, and it reduces the uncertainties of the euro zone,” he said. “So I think at this moment I am a little bit more optimistic that these trade tensions will resolve without bigger tensions.”
According to the latest outlook, the IMF estimated Myanmar’s growth rate at 7.5% this year, up 1.2 points from last year, while the Philippines is expected to match its 2016 growth at 6.8%. Laos dropped 0.1 point to 6.8% and Vietnam gained 0.3 point to 6.5%.
Japan’s growth rate was projected at 1.2% in 2017, up 0.2 point from last year, while China’s slipped 0.1 point to 6.6% and Singapore’s rose 0.2 point to 2.2%.