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IMF cuts Asia's growth forecast, warns of supply chain risks

The International Monetary Fund on Tuesday slashed this year's economic growth forecast for Asia and warned that a fresh wave of COVID-19 infections, supply chain disruptions and inflation pressures pose downside risks to the outlook.

In its regional outlook report, the IMF cut this year's economic growth forecast for Asia to 6.5%, down 1.1 percentage point from its projection made in April, as a spike in Delta variant cases hit consumption and factory output.

The IMF raised its Asia growth forecast for 2022 to 5.7% from a 5.3% estimate in April, reflecting progress in vaccinations.

China's economy will grow by 8.0% this year and 5.6% in 2022, but the recovery remains "unbalanced" as repeated coronavirus outbreaks and fiscal tightening weigh on consumption, it said.

China's economy hit its slowest pace of growth in a year in the third quarter, highlighting the challenge policymakers face as they seek to prop up a faltering recovery while reining in the real estate sector.

India is expected to expand 9.5% this year, while advanced economies like Australia, South Korea, New Zealand and Taiwan benefit from high-tech and commodity booms, the IMF said.

But ASEAN-5 countries - Indonesia, Malaysia, Philippines, Singapore, Thailand - still face "severe challenges" from a resurgent virus and weakness in service consumption, it said.

While inflation expectations are "generally well-anchored" in Asia, higher commodity prices and shipping costs, coupled with continued disruption of global value chains, are amplifying concerns over persistent inflation.

Most Asian emerging economies must maintain monetary support to ensure a lasting recovery, but central banks "should be prepared to act quickly if the recovery strengthens faster than expected or if inflation expectations rise," it said.

Reference: Reuters