Asia's growth outlook strong; faces risks from rise in protectionism: IMF

Asia’s growth outlook strong; faces risks from rise in protectionism: IMF

India International

The growth outlook for Asian economies remains strong, but the region is vulnerable to sudden tightening in global financial conditions, further market corrections and a shift towards protectionist policies, the IMF said on Wednesday. In its regional economic outlook update, the International Monetary Fund projected Asia to grow 5.6 percent this year and next, up 0.1 percentage point from its last update in October and accounting for about two thirds of global growth. The slight improvement in near-term prospects reflects “strong and broad-based” global growth and trade, reinforced by fiscal stimulus in the United States. But in the medium term, risks are tilted to the downside. “Asia remains vulnerable to a sudden and sharp tightening of global financial conditions, while too long a period of easy conditions risks a further buildup of leverage and financial vulnerabilities,” the Fund said.
“The gains from globalization have not been shared equally, and, as highlighted by recent tariff actions and announcements, a shift toward inward-looking policies is another risk, with the potential to disrupt international trade and financial markets.” Among other risks, the Fund cited geopolitical tensions, cyber attacks and climate change. Longer term, ageing demographics could be a substantial drag on economies and digitalisation may be a source of uncertainty. Most economies should, therefore, look to strengthen policy buffers as closing output gaps means they do not need further fiscal support, the Fund said.