Asian economic growth due to China’s resurgence

Asian economic growth due to China’s resurgence

The International Monetary Fund (IMF) has upped the Asian economic projection for this year. Meanwhile, China’s rebound supports growth. However, it warns of concerns such as prolonged inflation and global market volatility.

The IMF stated on Tuesday that the reopening of China’s economy is critical for the region. In addition, the spillover will focus on consumer and service-sector needs rather than investments.

The International Monetary Fund predicted that Asian and the Pacific will be the most prospering region among the world’s major ones in 2023, according to its regional economic outlook report. The IMF added that China’s and India’s buoyant outlooks impacted the dynamics. Domestic demand should remain the primary source of growth across Asia in 2023, according to the report. The Asian economy is on its way to rising 4.6 percent this year. Accounting for around 70 percent of world growth, it shall rise from 2022’s 3.8%. The IMF raised its prediction by 0.3% point from October.

China and India as major economic influencers

China and India will be important drivers, with growth rates of 5.2% and 5.9%, respectively. However, growth in the rest of Asia will likely slow this year, according to the research.

As a result, the IMF reduced its Asian growth prediction for next year by 0.2%. That way, it went up to 4.4%. Besides, the IMF warned of risks to the outlook, such as higher-than-expected inflation. Furthermore, he mentioned such factors as declining global demand and the impact of banking sector stress in the US and Europe.

Asia’s solid capital and liquidity buffers give it a degree of protection from market turbulence. Still, its highly leveraged corporate and household sectors are “substantially” more prone to a notable hike in borrowing costs, as stated in the report.

The IMF also advised Asian central banks, barring Japan and China, to maintain the restrictive monetary policy to reduce inflation, which might remain persistently high due partly to solid domestic demand.

Helbing also shared his final thoughts on the matter. He said the rebound has not yet occurred in places with weaker housing markets. Therefore, we require further policy measures to reduce possible hazards.