"The New Cold War Structure Will Hit the Asian Economy the Hardest"

[Asia Economy Reporter Yujin Cho] An analysis has emerged that the 'new Cold War' structure between the United States and China amid the Ukraine crisis will have the greatest impact on the Asian regional economy.

On the 27th (local time), according to the US economic media CNBC, the International Monetary Fund (IMF) downgraded its economic growth forecasts for China and the Asian region in its Asia-Pacific regional economic outlook report released that day.

The IMF lowered its growth forecast for the Asian region this year to 4.0%, down 0.9 percentage points from the April estimate of 4.9%, and also cut next year's growth forecast from 5.1% to 4.3%. This is far below last year's level (6.5%), when the COVID-19 pandemic was at its peak.

The IMF also lowered China's economic growth forecast from 4.4% in April to 3.2%, and expected it to remain below 5% in 2023 (4.4%) and 2024 (4.5%).

For South Korea, the economic growth rate is projected to remain in the 2% range this year (2.6%), next year (2.0%), and in 2024 (2.7%).

The report evaluated that sanctions on Russia have increased policy uncertainty surrounding trade, causing companies to halt employment and investment, and blocking new companies from entering the market.

It also stated that trade disputes would deal a greater blow to emerging Asian markets and highly indebted companies. According to IMF statistics, corporate investment decreased by 3.5% over two years following the start of the US-China trade dispute in 2018.

The report further noted that while the impact of COVID-19 on the Asian economy is weakening, the region is facing repercussions from Russia's invasion of Ukraine, global interest rate hikes led by the US, and demand slowdown. The rapid slowdown of the Chinese economy due to the zero-COVID policy and the real estate market downturn is also seen as a major obstacle to the Asian regional economic recession.

Due to consecutive defaults by Chinese real estate developers, liquidity is drying up, and there is a possibility that the crisis could spread to the banking system. Moreover, the IMF forecasted that the likelihood of the Chinese real estate crisis being resolved soon is low.

This content was produced with the assistance of AI translation services.