SINGAPORE, Oct 24 — The International Monetary Fund (IMF) expects Asian economies to grow at five per cent this year — the slowest expansion since the global financial crisis a decade ago — and predicts that the subdued conditions will continue into 2020.
This is a downgrade from the IMF’s 2019 estimate of 5.4 per cent in April. It noted that the outlook has deteriorated noticeably since April amid weaker global trade, owing to the trade war between the United States and China and other headwinds.
In its October 2019 World Economic Outlook report released yesterday, the global body also slashed growth forecasts for several Asian economies, including Singapore, Hong Kong and China, from its April report.
Growth forecasts cut
IMF October growth outlook for 2019 for advanced economies, compared to April estimates
- Singapore: Cut from 2.3 per cent to 0.5 per cent (the official Singapore forecast is for growth of between zero and one per cent)
- Hong Kong: Cut from 2.7 per cent to 0.3 per cent
- South Korea: Cut from 2.6 per cent to two per cent
- Japan: Cut from 1 per cent to 0.9 per cent
IMF October growth outlook for 2019 for emerging economies, compared to April estimates
- China: Cut from 6.3 per cent to 6.1 per cent
- India: Cut from 7.3 per cent to 6.1 per cent
- Indonesia: Cut from 5.2 per cent to 5 per cent
- Thailand: Cut from 3.5 per cent to 2.9 per cent
- Malaysia: Cut from 4.7 per cent to 4.5 per cent
- Philippines: Cut from 6.5 per cent to 5.7 per cent
The gloomy outlook extends to 2020, where IMF also cut its growth forecast for several Asian economies.
- Singapore: Cut from 2.4 per cent to one per cent
- Hong Kong: Cut from three per cent to 1.5 per cent
- China: Cut from 6.1 pent to 5.8 per cent
In its October report, the IMF stated that “some of the biggest downward revisions for growth are for advanced economies in Asia… a common factor being their exposure to slowing growth in China and spillovers from the US-China trade tensions”.
For 2020, the IMF expects Asian economies to grow 5.1 per cent, down from 5.4 per cent in its April projections.
IMF also downgraded global growth forecasts, with the world economy expected to grow at three per cent in 2019, and 3.4 per cent in 2020. This was cut from the April estimates of 3.3 per cent growth for 2019, and 3.6 per cent growth for 2020.
Reasons for the downgrade
Although Asia is still the world’s fastest-growing region, contributing more than two-thirds of global growth, the IMF said that “near-term prospects have deteriorated noticeably” since its April assessment, with “risks skewed to the downside,” in an accompanying Regional Economic Outlook report, focused on the Asia-Pacific region.
Growth in Asia slowed in the first half of 2019 due to:
- A decline in manufacturing activity
- Weak intra-regional trade, especially with China
- Slowdown in China
The IMF expects growth in Asia to continue to slow down.
Future risks to the region would include:
- Escalation of trade tensions between the US and China
- Tighter financial flows
- Faster-than-expected China slowdown
- Higher oil prices
- Trade tensions between Japan and South Korea
- Deterioration of political crisis in Hong Kong and Kashmir
- High household and corporate debt
What can governments do?
The IMF said there is a “need for policies aimed at buffering the slowdown where necessary, strengthening resilience to growing downside risks, and raising inclusive medium-term growth”.
- Fiscal policies should support domestic demand — where governments boost the local economy by pumping in extra cash through public spending
- Accommodative monetary policies — where central banks try to help the local economy by lowering interest rates or the value of the country’s currency, or effectively printing more money
- Improve governance of public sector banks
- Clean up bank and corporate balance sheets
- Closely monitor real estate markets
- More integration of trade
- Upgrade human capital through training — TODAY
