Economic Buzz: IMF Lowers Asia-Pacific Growth Forecast To 4.9%

26 Apr 2022 , 12:10 PM

IMF has lowered growth forecast for Asia Pacific by -0.5% to 4.9% in 2022 which is slower than last years 6.5% growth rate. Russias invasion of Ukraine will pose the biggest challenge for economic growth, with the regions advanced economies hurt most by reduced demand from Europe and emerging markets feeling the effects of higher global commodity prices, according to our latest projections. Asias advanced economies have strong ties with Europe, the continents weaker growth will weigh on external demand and ultimately growth for major regional trade partners like Japan and Korea.

Most of Asias emerging and developing economies are net importers of oil, gas, and metals, making them particularly vulnerable to rising global commodity prices. High food and fuel costs also add to inflation pressures. Corona virus infections in most of Asia have retreated from their peaks during the rapid spread of the omicron variant, with mobility indicators approaching pre-pandemic levels. Because of this, IMF has projected Chinas growth rate to be slow at 4.4 percent, which will affect Asias emerging economies through reduced trade and demand.

Tightening global financial conditions will weigh on economic growth. Government bond yields in major Asian economies have begun rising as the Federal Reserve starts to lift US interest rates. Slower growth and rising prices, coupled with the challenges of war, infection and tightening financial conditions, will exacerbate the difficult policy trade-off between supporting recovery and containing inflation and debt.

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