Economists have turned bullish on China, with the country halting its Covid Zero policy and reopening in the second half of 2022. The Indian economy has also shown positive signs, with its growth being amongst the highest in the world over the last two years.
The war in Ukraine and the rise of central bank rates to fight inflation were highlighted as factors constraining economic activity. However, the re-opening of China and the loosening of pandemic-related lockdown restrictions may help to boost global growth.
The ongoing war in Ukraine and logistical challenges posed by the pandemic and other geopolitical issues have kept price pressures high, particularly in energy commodities and general foodstuffs.
Asia’s emerging and developing economies are hitting their stride as pandemic supply chain disruptions fade and the service sector booms. “Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are all back to their robust pre-pandemic growth,” the organisation said.
The IMF noted that conditions in Asia and the Pacific are now improving, with economic headwinds that the regions faced last year now fading.
“These developments are helping improve prospects across the region, with growth set to accelerate to 4.7 percent this year from 3.8 percent in 2022. This will make it by far the most dynamic of the world’s major regions and a bright spot in a slowing global economy,” it said.With central banks opting to cut rates aggressively, Asian economies are likely to see lower levels of inflation. “There are now encouraging signs that headline inflation peaked during the second half of last year, though core inflation is proving more persistent and has yet to ease definitively. We expect inflation to return to central bank targets sometime next year amid an easing of financial and commodity headwinds,” the IMF said.
With higher spending during the pandemic driving fiscal deficits higher, several Asian countries continue to face debt distress.
“With several Asian countries facing debt distress, authorities must continue with their plans for gradual fiscal consolidation. Doing so will also ensure that monetary and fiscal policies are not acting at cross purposes,” it said.