Asia Pacific has strongest growth outlook, says IMF

News | 9 May 2017

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The IMF has increased its growth forecast for the Asia Pacific region to 5.5%, up from 5.3% forecast in the October 2016 World Economic Outlook.

Stimulus policies in the two largest economies in the region, China and Japan, which are in turn having a positive impact on the trade activities of smaller economies ensures Asia Pacific has the most robust growth prospects in the world, the IMF says in its Regional Economic Outlook.  

What is more, additional stimulus packages in the US and China could provide further short-term support, while risks to the revised outlook “are still tilted on the downside”.

“Across the region, forward-looking indicators such as the Purchasing Managers’ Index suggest continued strength in activity into early 2017,” the IMF said.

India and South Korea are the only two countries in the region to have their growth forecasts revised down, due to a currency exchange initiative and political uncertainty respectively.  

One of the biggest short-term risks the outlook highlights is tighter financial conditions across the world, “which could interact with and exacerbate balance sheet weaknesses in a number of economies.”

Protectionist policies would also negatively impact the region given its trade openness, and a more turbulent transition towards a consumption driven economy in China “would also have large spillovers.”

However, over the medium-term, India is expected to pick up some of the slack created by slower Chinese growth, as the country continues its currency transition which has had the effect of increasing the amount of liquidity in the banking system, increasing monetary digitisation, and increasing tax revenues as new deposits into banks have to be verified.  

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