Mumbai – In a recent report titled “Regional Economic Outlook for Asia and Pacific,” the International Monetary Fund (IMF) revealed that India and China are poised to collectively contribute to a significant portion of global economic growth in 2023 and 2024. The Asia Pacific region continues to stand out as the most vibrant economic landscape this year.
According to the IMF’s analysis, the Asia Pacific’s growth is anticipated to surge from 3.9% in 2022 to a promising 4.6% in 2023. However, there is an expected slowdown to 4.2% in 2024 and a further decrease to 3.9% in the medium term, marking the region’s lowest growth rate in the last two decades, except for the exceptional year 2020.
The IMF has revised its estimate for India’s growth, forecasting a robust 6.3% growth rate in FY24. This upward revision is attributed to India’s resilient domestic demand and a substantial influx of investment. Meanwhile, the IMF anticipates China’s economy to expand by 5% in 2023 and 4.2% in 2024, slightly lower than the previous projections of 5.2% and 4.5%, respectively, made in April.
In the IMF’s analysis, advanced economies in Asia are grappling with restrictive financial conditions that are anticipated to dampen demand. The outlook for exports, on the other hand, remains contingent on the price movements of global commodities, particularly in countries like Australia and New Zealand, and the prevailing technology cycle in nations like Korea, Singapore, and Taiwan Province of China.
For emerging markets in Asia, the IMF notes that reasonably accommodating financial conditions will continue to support domestic demand despite monetary policy adjustments. Nevertheless, challenges persist in the form of external demand and sluggish investments.
China’s somewhat subdued growth prospects in the near term are expected to have repercussions on the broader regional growth. The IMF predicts a 5% expansion for China in 2023 and a 4.2% growth in 2024. This is a slight downward adjustment of 0.2 and 0.3 percentage points, respectively, compared to the April 2023 World Economic Outlook, primarily due to renewed weaknesses in the property sector, despite additional policy support.
The IMF’s report underscores the persistently challenging global economic conditions for Asia and the Pacific, with central banks worldwide tightening monetary policies. Nonetheless, a decline in global commodity prices since their peak in 2022 has contributed to disinflationary pressures.
The report also acknowledges the positive surprises stemming from China’s earlier-than-expected reopening in the first half of the year and the buoyant private demand that has resulted in favorable growth outcomes for India.
While China maintains a low and sub-target inflation rate, India has witnessed a spike in headline inflation during the third quarter, primarily driven by an abrupt increase in vegetable prices due to weather-related factors.
Furthermore, the IMF predicts that the emerging market economies of the Association of Southeast Asian Nations (ASEAN) are likely to achieve growth rates of 4.2% in 2023 and 4.6% in 2024. This represents a slight downward revision of 0.3 percentage points compared to the April forecasts, attributed to weakened external demand and the effects of monetary policy tightening on domestic demand.
In conclusion, the IMF’s report emphasizes the dynamic nature of the Asia Pacific region’s economies, with India and China poised to play a pivotal role in the global economic landscape in the coming years.
