The International Monetary Fund (IMF) predicts that economic growth in the Asia-Pacific region will accelerate from 3.8% last year to 4.6% this year, an increase of 0.3 percentage point from last October's forecast. The IMF believes that China's economic rebound will power the region and contribute one-third of global growth this year.
The head of the IMF Asia-Pacific pointed out that China's monetary and fiscal policies have room to provide support for recovery, but they still face some long-term challenges, especially in the real estate industry. The IMF also mentioned that due to changes in China's population structure, the growth rate will slow down in the future, and it is appropriate to implement structural reforms to promote long-term growth.
The IMF pointed out in its latest "Regional Economic Outlook" released in May that the Asia-Pacific region will contribute nearly 70% of global growth this year, which is much higher than in recent years. The most important change is China's reopening. A surge in consumption from China is driving growth, accounting for an estimated 34.9 percent of global growth, despite weak demand elsewhere.
India's economy is also showing resilience, contributing an estimated 15.4 percent. The combined growth rate of China and India has accounted for half of the global economic growth.
At the same time, the IMF predicts that China's economy will grow by 5.2% this year, a sharp increase of 0.8 percentage points from last October's forecast.
Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said that China's inflation is very low and there is fiscal space to maintain monetary and fiscal policy support to accelerate economic recovery.
Regarding China's April economic data reflecting that the recovery may be slowing down, especially in terms of manufacturing, Srinivasan pointed out that there is no need to over-interpret weekly or monthly economic data. He believes that the current vitality of the Chinese economy is very strong.
Thomas Helbling, deputy director of the Asia-Pacific Department, mentioned that the real estate industry is a long-term challenge for China. The region is also lacklustre, pending a return of buyer confidence. We should be more active in assisting weaker real estate companies to restructure and launch more measures to support the industry. He mentioned that due to the downturn in the real estate industry, the pressure on local finances has increased, and the situation needs to be closely observed.
There are downside risks to the Asia-Pacific economy
The IMF report pointed out that although it is optimistic about the economy in the Asia-Pacific region, it also warns of downside risks. These risks include tight short-term monetary and fiscal policies of various countries, the need to deal with the spillover effects of the United States’ more-than-expected tightening monetary policy in the future, and supply chain disruptions related to geo-economic fragmentation.
Growth in the Asia-Pacific region will slow to 3.9% over the next five years, according to the IMF, the lowest medium-term forecast in the region's recent history.
The report also pointed out that various countries have implemented tightening monetary policies, the war between Russia and Ukraine continues to drag down economic activities, coupled with factors such as high public debt and increased interest costs in some countries, have brought more uncertainties to the already complex global economic situation.
Regarding China, the IMF said that China has been the main engine of economic growth in the region and the world for the past few decades, but China's economic growth may slow down in the next few years. Therefore, priority should be given to implementing structural reforms to promote long-term economic growth by encouraging innovation, promoting digitalization, and accelerating green energy transition.
