IMF slashes Asia growth forecast to 6.5pc

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The International Monetary Fund (IMF) has lowered its 2021 growth forecast for the Asian economy to 6.5 percent, down by 1.1 percentage points from its April projection.

“Risks are tilted to the downside, mainly because of uncertain pandemic dynamics, vaccine efficacy against virus variants, supply chain disruptions, and potential global financial spillovers from the US monetary normalisation,” the IMF said. It added that, “The global Covid-19 pandemic is still ravaging the region.”

Nevertheless, Asia-Pacific will remain the fastest-growing region in the world, IMF added. China’s economy is expected to grow by 8% in 2021 and 5.6% in 2022. “But the recovery remains unbalanced because private consumption continues to lag amid repeated outbreaks and significant fiscal policy tightening,” the IMF report said.

The organization expects India to expand 9.5% this year after a sharp decline in 2020. Growth prospects for Japan have been downgraded to 2.4% after a disappointing second quarter and state-of-emergency extensions.

According to the IMF, advanced economies like Australia, South Korea and New Zealand are benefitting from high-tech and commodity booms. Other emerging market and developing economies, notably ASEAN countries, still face severe challenges from a resurgent virus and from weakness in contact-intensive sectors.

Brent, the international benchmark under which two thirds of the world’s oil trades, has risen more than 60 percent this year to trade above $85 per barrel, as an economic recovery globally has increased demand and has triggered an energy crunch. An increase in oil prices feeds into transportation and manufacturing costs, which in turn, affects businesses across the board. Ultimately, they may have to pass the costs on to consumers.