Economy: IMF positive on Asia growth prospects for India and China in 2024
Virendra Pandit
New Delhi: The International Monetary Fund (IMF) has boosted its growth forecast for Asia in 2024, reflecting a positive outlook for the region’s two largest economies—India and China—on the back of their governments’ stimuli.
Asia is set to expand 4.5 percent this year from 2023, 0.3 percentage points higher than the October regional outlook but a slowdown from last year’s 5 percent pace, according to the IMF report released on Tuesday.
The fresh data takes into account the higher forecast for India published earlier this month and China’s pace, on the back of expectations that government stimulus will boost growth. On China, the IMF said the first-quarter growth came in stronger than expected on robust exports and manufacturing demand, which may prompt another upward revision, the media reported.
“Global disinflation and the prospect of lower central bank interest rates have made a soft landing more likely. Hence risks to the near-term outlook are now broadly balanced,” Krishna Srinivasan, IMF’s Director for the Asia and Pacific Department, wrote in a blog post.
The Chinese government has ramped up spending this year to support an economy still reeling from a crippled property sector and to propel growth to its target near 5 percent in 2024. In India, the government boosted capital expenditure by a third for this year, the third year in a row.
China’s real gross domestic product (GDP) is seen expanding by 4.6 percent in 2024 compared to last year and India to rise by 6.8 percent this year, the IMF said.
It left the 2025 regional outlook unchanged at a 4.3 percent advance.
The global lender also cited risks, the chief among them being a long-term property sector downturn in China, which would weaken demand and prolong deflation. Other challenges include growing fiscal deficits and risks to trade from US-China tensions.
It also warned Asian nations of pinning too much on expectations for the US Federal Reserve’s path when deciding their monetary policy. Indonesia, this month, unexpectedly raised interest rates, to address a currency walloped by a strengthening US dollar. Southeast Asia’s largest economy is among many countries in the region contending with currency depreciation as the prospects of early Fed rate cuts wane.
While following the Fed “could limit exchange rate volatility” but “it risks that central banks would fall behind (or move ahead of) the curve and destabilize inflation expectations,” Srinivasan said.
