IMF Raises Asia Pacific Economic Projection to 4.5% in 2024

 The International Monetary Fund (IMF) has raised its economic growth projection in the Asia Pacific region to 4.5% in 2024. Based on the Regional Economic Outlook Asia and Pacific report released by the IMF, the projected economic growth is up 0.3% compared to the projection in October 2023.

Image : Google.com/images.app.goo.gl/yzocgEFRKckpyKk77

Director of the IMF's Asia and Pacific Department, Krishna Srinivasan, explained that the reason for the increase in economic projections was due to observing solid economic growth in 2023 and the support of government policies. In fact, economic activity in Asia and the Pacific exceeded expectations in the second half of 2023, despite facing a number of challenges, characterized by tight monetary policy and weak external demand.

 "We hope that the Asia Pacific region will remain the most dynamic region in the world, contributing around 60% of global economic growth," said Krishna, quoted from the IMF report, Tuesday (30/4).

The IMF noted that the region's economic growth will reach 5.0% in 2023. This value rose 0.4%, stronger than estimated in October 2023. This growth was mainly driven by strong domestic demand in developing countries. 

However, inflation has continued to decline, especially in developing countries in Asia, which is reflected in monetary tightening in 2022 and early 2023. This is in line with falling commodity prices, low inflation in prices of global manufactured goods, and increasing supply capacity. 

post the Covid-19 pandemic. Krishn said, there are differences in the speed and level of disinflation between Asian countries. However, some countries are still experiencing ongoing price pressures and some are facing the risk of deflation.

However, several countries recorded encouraging performance in early 2024. The IMF then estimates that economic growth this year will continue and reach 4.5%. Krishna said that the economic growth projection took into account a number of factors.

 First, countries in the Asia Pacific region have the right macroeconomic policy direction. Second, the surge in inflation or price pressures is starting to subside, especially in countries with inflation rates above the target. Meanwhile, inflation will increase in countries with low inflation rates.

Asia Pacific Economic Projections in 2025 Meanwhile, the projected economic growth in 2025 is 4.3% or in line with previous projections. Krishna said the main factor in the slowdown was because China's economy would contract next year.

 "The property sector is falling further, so it is estimated to be a risk of [economic] decline, even though the government has issued many policies. This risk will have a negative impact on neighboring China," said Krishna.

On the other hand, Japan's successful exit from negative interest rates will reduce market concerns about the adverse impact of sudden price fixing. For this reason, the central bank is asked to ensure that the inflation rate returns to target, both in countries experiencing persistent inflation due to price pressures or in countries facing the risk of deflation.

 Krishna also suggested that the government focus on domestic price stability and avoid decisions that are too biased towards the policies of the US central bank, the Fed. The IMF also expects higher debt levels and interest costs to weigh on the fiscal balance. 

Therefore, efforts to maintain fiscal consolidation are necessary, especially in addressing medium-term structural challenges, including an aging population and climate change.

 "The tighter monetary policy in the last two years is also still affecting corporate and household balance sheets. The government must continue to closely monitor the buildup of risks," he said.

Location:

Share :