As the rest of the world faces slower growth from tightened monetary policy and Russia-Ukraine conflict, the Asia-Pacific region is seeing fruits thanks to resilient growth in India and China’s recovery, says the International Monetary Fund. It believes the India and China will contribute around half of global growth this year.
The IMF expects Asia-Pacific’s gross domestic product (GDP) to expand by 4.6 percent in 2023, 0.3 percentage points higher than its forecast in October. The report said Asia and Pacific will be the most dynamic of the world’s major regions in 2023, predominantly driven by the buoyant outlook for China and India.
However, the UN financial agency trimmed its forecasts for India’s full-year growth. But it expects the Indian economy to expand by 5.9 percent in 2023. Krishna Srinivasan, IMF’s director of the Asia and Pacific department, recommended central banks in the region to monitor price stability. “We believe that core inflation being sticky, central banks need to keep their eyes on inflation and address the problem head on, so what we’re saying is ‘higher for longer’ for Asia.”
The IMF outlined that stronger external demand from China will provide some respite to advanced economies in the region. But it will be largely outweighed by the drag from other domestic and external factors. The agency expects growth in Asia, outside of China and India, to bottom out in 2023. The report stated that inflationary pressures in Asia’s advanced economies are expected to be more persistent than envisioned in the October 2022 World Economic Outlook, as wage growth has recently become more apparent in Australia, Japan, and New Zealand.
But high consumption in China will likely spill over the rest of the Asia-Pacific. The IMF said China’s reopening after lifting most of its stringent COVID restrictions will result in a pickup in private consumption that will drive the Asian giant’s growth rebound.