IMF downgrades forecast for Asian economy for 2020
The International Monetary Fund said Wednesday that Asia’s economic slowdown this year will be stronger than previously thought, as several emerging markets in the region slowed sharply amid the coronavirus outbreak..
As the IMF says in its latest report «Economic Outlook for Asia-Pacific», Asia’s economy is projected to contract 2.2% this year. This is worse than the June forecast of the fund for a 1.6% decline, and contrasts with the decision of the IMF to revise upward the forecast for the global economy..
The IMF said that the downgrade of the forecast Asian economy «reflects a sharper decline, especially in India, the Philippines and Malaysia». According to the fund, India and the Philippines have experienced «especially sharp» drop in economic activity in the second quarter, «given the continued rise in coronavirus cases and prolonged quarantine measures».
The IMF expects India’s economy to contract 10.3% in the fiscal year ending March 31, 2021. It’s worse than predicted in June, a decrease of 4.5%.
The Philippines’ economy is projected to contract 8.3% in calendar 2020, much more than the 3.6% contraction forecast in June..
Malaysia’s economy is likely to contract 6% this year, worse than the June IMF forecast of 3.8% contraction.
The forecasts were not lowered for all Asian economies. According to the IMF, economic activity in the region is developing «different speeds», and China – First Country to Report Covid-19 Cases Leads Recovery.
China is one of the few Asian countries to see growth this year. The fund raised its 2020 growth forecast for the Asian giant to 1.9% from its June forecast of 1% due to «faster than expected recovery in the second quarter».
«After a low in February 2020, China’s economic growth has been boosted by infrastructure, real estate investment and a surge in exports, mainly medical and protective equipment, and electronics for work from home, the IMF wrote in its report. – This will be followed by a gradual recovery in private investment and consumption».
IMF expects China’s economy to grow to 8.2% next year.
Asia’s economy is expected to grow 6.9% in 2021, which contrasts with the fund’s June 6.6% growth forecast. However, the fund said the region’s production is likely to remain below pre-pandemic levels for some time due to «scarring effect».
This effect refers to the medium to long term damage to the economy after a severe shock..
IMF explains how post-covid effect will hinder Asian recovery.
Fear of infection and social distancing measures weaken consumer confidence, which will keep economic activity below acceptable levels until a vaccine is developed.
Labor market indicators are deteriorating «much stronger» compared to the global financial crisis, when unemployment among women and young workers is on the rise.
Speaking Thursday on BBC Asia Business Report, Jonathan Ostry, IMF Acting Director for Asia Pacific, said: «This is something that for a highly export-oriented region poses a great risk in the future. We are concerned about the separation of the main technology centers – not only in China and the United States, but also in a broader sense, which could have consequences in the form of a reduction in high-tech trade, leading to inefficient production».