The International Monetary Fund (IMF) flagged a common link between India and China's growth numbers in its latest report where it also revised the outlook for Asia.
The report said that in China and India, public investment made a significant contribution supporting growth. "In emerging markets, growth was supported primarily by strong private demand. In China and, especially, India, public investment made an important contribution," it said.
It further said that countries in the (APAC) region generally faced weak export demand, partly reflecting the normalisation in the demand for goods relative to services after the Covid-19 pandemic.
Economic growth in the Asia Pacific region is better than previously projected but is expected to slow from 5 per cent in 2023 to 4.5 per cent in 2024, according to IMF's Regional Economic Outlook for Asia and Pacific.
In the Outlook report, the International Monetary Fund said the region remains inherently dynamic and accounts for about 60 per cent of global growth.
The Asia-Pacific region is marked by both resilient growth and rapid disinflation.
Commonly referred to as APAC, the Asia Pacific region is a part of the world defined by its proximity to the Western Pacific Ocean, typically including much of East Asia, South Asia and Oceania.
"Drivers of growth are as heterogenous as the region, straddling from resilient domestic consumption in most ASEAN countries, to strong public investment in China and, most notably in, India, and to a sharp uptick in tourism in the Pacific Island countries," Krishna Srinivasan, director of the Asia and Pacific Department Singapore, IMF, said in his opening remarks.
Disinflation has advanced throughout the region, albeit at different speeds--in some, it remains above target (Australia and New Zealand), in others, it is at or close to central bank targets (emerging markets and Japan), while in some there are deflation risks (China and Thailand).
"China is a source of both upside and downside risks. Policies aimed at addressing stresses in the property sector and to boost domestic demand will both help China and the region. But sectoral policies contributing to excess capacity will hurt China and the region. Geoeconomic fragmentation remains a significant risk," the IMF official said.
The IMF said Asian central banks should continue to focus firmly on domestic price stability and avoid making policy decisions overly dependent on anticipated interest rate moves by the Federal Reserve.
Relatively lower inflation in Asia means the region's central banks can focus more on domestic conditions and less on what the U.S. Federal Reserve might do when setting monetary policy, the International Monetary Fund said on Tuesday.
The region is heading for a "soft landing" thanks to rapid disinflation creating room for easing monetary policies, the lender said in a report, although the pace of economic expansion is expected to slow over the next two years.
"Don't tie yourself too tight to what the Fed does, look at what's happening to inflation (domestically)," IMF Asia-Pacific Director Krishna Srinivasan told reporters after the release of the Regional Economic Outlook report.
"Asian countries are better placed to cope with exchange rate movements today owing to fewer financial frictions and better macro fundamentals and institutional frameworks, and should continue to allow exchange rates to act as a buffer against shocks."
The IMF forecast growth in the region would slow from 5 per cent in 2023 to 4.5 per cent this year and 4.3 per cent in 2025, with near-term risks "broadly balanced".
A structural slowdown in China, including a correction in its property sector, would remain a key factor in slowing growth, the IMF report said, adding that the region remained vulnerable to commodity price shocks and trade disruptions caused by conflicts in the Middle East and Ukraine.
"Policies addressing stressors in the property sector and to boost domestic demand will both help China and the region, but policies contributing to excess capacity will hurt," Srinivasan said.
Source Name : Economic Times