"The forecast for South Korea was raised from 1.6 per cent to 3.6 per cent, for India from 5.6 per cent to 6.4 per cent, and for Indonesia from 3.5 per cent to to 4.8 per cent. The collective forecast for the five large developing economies of south-east Asia – Indonesia, Malaysia, the Philippines, Thailand and Vietnam (photo Saigon Streets) – was raised from 2.3 per cent to 4 per cent"
October 29, 2009
IMF sharply improves Asia forecast
The International Monetary Fund on Thursday more than doubled its forecast for Asian economic growth for the year and raised its forecast for 2010, reflecting a sharp improvement in the region’s prospects over the past six months.
In its latest Asia Pacific regional economic outlook, the fund forecast growth in gross domestic product of 2.8 per cent for this year and of 5.8 per cent for 2010. In May, the IMF said growth would be just 1.2 per cent in 2009 and 4.3 per cent in 2010.
“The primary driver of Asia’s recovery has been a progressive return towards [normality] following the abrupt collapse in global trade and finance at the end of 2008,” the IMF said, also highlighting forceful monetary and fiscal stimulus programmes within the region. “Just as the US downturn triggered an outsized fall in Asia’s GDP because international trade and finance froze, now their normalisation is generating an outsized Asian upturn.”
Anoop Singh, the IMF’s Asia-Pacific director, said the recovery was largely export based, adding that regional governments needed to maintain caution because of the sluggishness of advanced economies. The fund forecast that 2010 growth would consequently remain below the 6.6 per cent annual regional average posted over the past decade.
“As we look ahead to the next decade, it is likely that private demand from advanced economies and the US is not going to be as strong as we had expected,” Mr Singh said. “This means that for Asia to retain its strong growth momentum, it needs to shift the drivers of recovery from an export engine more into domestic demand within Asia.”
The IMF said there had been “exceptional uncertainty” at the time of its May forecasts, which had now receded. However, it said several risks remained that could weaken Asian growth, including a premature exit by governments from extraordinary monetary and fiscal policies.
“If signs of renewed external environment weakness were to arise, the positive feedback loop triggered in Asia could go [into] reverse,” the report said, warning that renewed foreign risk aversion and weak demand could trigger capital outflows and induce Asian companies to abandon labour-hoarding and shed jobs, leading to a sharp increase in unemployment.
In a slew of country upgradings published with the report, the IMF raised its growth forecasts for 2010 for Japan from 0.5 per cent to 1.7 per cent, for Australia from 0.7 per cent to 2 per cent, and for China from 7.5 per cent to 9 per cent.
The forecast for South Korea was raised from 1.6 per cent to 3.6 per cent, for India from 5.6 per cent to 6.4 per cent, and for Indonesia from 3.5 per cent to to 4.8 per cent. The collective forecast for the five large developing economies of south-east Asia – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – was raised from 2.3 per cent to 4 per cent.
