IMF: "Asia's Economic Soft Landing More Likely... China and India Economies Are the Key"

The IMF has raised its growth forecast for Asia's economy this year, lending weight to the possibility of a soft landing. It sees India's economic growth and China's stimulus measures as key drivers.

On the 30th (local time), the IMF released its Asia-Pacific regional economic outlook report and announced these details at a press conference. The IMF first predicted that the pace of economic slowdown in the Asia-Pacific region would be slower than expected, projecting this year's economic growth rate at 4.5%. Although this is a slowdown compared to last year's Asia-Pacific growth rate (5.0%), it is 0.3 percentage points higher than the forecast made in October last year. The growth forecast for the Asia-Pacific region next year is 4.3%.

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Krishna Srinivasan, IMF Director for the Asia-Pacific Department, explained, "The outlook for the Asia-Pacific region in 2024 has brightened," adding, "With inflationary pressures easing and benchmark interest rates expected to decline, the possibility of a soft landing has increased." He also noted, "The upward revision of this year's growth forecast reflects China's stimulus measures and India's expansion of public investment," adding, "In other emerging Asian countries, robust private consumption will be a major growth driver."

The Asia-Pacific region includes Asian countries such as South Korea, as well as Australia and New Zealand. The IMF estimates that the Asia-Pacific region will account for about 60% of global economic growth. Srinivasan stated, "Fiscal tightening, a decline in global commodity prices, and easing supply chain disruptions have contributed to lowering inflation in Asia," but added, "However, in some advanced economies such as South Korea, Australia, and New Zealand, inflation remains above target levels, so differentiated policies are needed by country."

Risks to the Asian economy include the downturn in China's real estate market and geopolitical conflicts. Srinivasan diagnosed, "The biggest risk to the Asian economy is the expansion of adjustments in China's real estate market, which could shrink demand and increase the possibility of deflation," adding, "A policy package is needed to swiftly remove insolvent real estate developers, promote the completion of housing projects, and manage the debt risks of local governments." He also pointed out that "China's overproduction and the resulting decline in export prices could directly impact other Asian countries with similar trade structures."

The IMF's call for national-level debt and deficit management policies applies not only to China but to all governments in Asia. Srinivasan urged, "According to current fiscal plans, debt ratios in most countries are expected to stabilize, but they remain much higher than before the COVID-19 pandemic," adding, "Governments need to find ways to increase revenues and rationalize expenditures to reduce debt and interest costs."

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