China’s economic rebound propels Asia-Pacific’s growth: IMF report
According to the latest report by the International Monetary Fund (IMF) on the Asia-Pacific Economic Outlook, the region is expected to be a significant contributor to the world’s economic growth. The report suggests that the recovery in China and the strong growth in India will be the driving forces behind Asia’s dynamism.
The IMF has forecasted a growth rate of 4.6 percent in the Asia-Pacific region this year, up from 3.8 percent in the previous year. This growth is expected to contribute around 67.4 percent to the global economy. In addition, China and India are predicted to contribute more than half of the world’s growth in 2023, with China accounting for 34.9 percent and India accounting for 15.4 percent.
During the first quarter, China’s gross domestic product (GDP) grew at an impressive rate of 4.5 percent, while many other countries are facing a slowdown in their economic growth, as per the official economic data released by the National Bureau of Statistics (NBS).
The data also revealed that the service sector in China had a swift recovery, with a 5.4 percent increase in the value added of services compared to the same period last year, which was 3.1 percentage points higher than the fourth quarter of 2022. Krishna Srinivasan, director of the Asia and Pacific Department of the IMF, stated that while China’s demand for investment goods has traditionally had the strongest spillover effect, this time, the biggest spillover effect is from its demand for consumption.
According to the IMF, China must maintain a strong macro-policy in the short term to sustain its current economic recovery momentum while avoiding premature tightening of its fiscal policy. In the medium and long term, the IMF recommended that the Chinese economy rebalances towards consumption and shifts its growth focus away from investment. A supermarket in Dalian, Liaoning Province, was pictured with shoppers on May 10, 2023. /CFP
According to the IMF, Asian banks have been well-capitalized and have demonstrated resilience following the financial turmoil in the U.S. and Europe. This means that bank failures in those regions have had limited impact on the Asia-Pacific region.
However, the IMF is concerned about the slow growth in the U.S. and Europe, which it says poses a risk to the Asia-Pacific region due to weak external demand. This risk is expected to persist until 2024. The IMF also warned that the U.S. debt ceiling impasse could have strong spillover effects in the Asia-Pacific region, and that uncertainty surrounding Japanese monetary policy and an increase in government bond yields could lead to global spillovers.