The IMF Is Casting Gloom On Asian Economic Growth
The IMF is predicting a slow growth phase for Asian economies. In its latest regional report released on Wednesday, the Fund is not as optimistic as many may have wished. It has cast a gloom over major Asian economies and given more pessimistic predictions compared to April this year. The Trade War and general economic growth slowing globally contribute to much of these.
Technical Recession
Hong Kong, which has hit major headlines in recent times because of political unrest, is in the spotlight. Carrie Lam who is the city’s chief executive claims that the city is already in a technical recession as it stands. The IMF projects that Hong Kong’s economy will grow 0.3% this year and a further 1.5% in 2020. Compared to the estimates made back in April, this is a 2.4% and 1.5% respective shrink.
The Fund, in its report, stated that the political upheavals in Hong Kong are likely to have spillover effects to its neighbors. Already, the economic growth for the entire Asian economy will grow just 5% in 2019. In 2020, the IMF expects this to grow by a further 0.1% and stand at a moderate growth rate of 5.1%. Compared to the projections that the Fund made in April, this is 0.4% and 0.3% lower.
Trying Times Ahead For Asian Economies
The projections for South Korea appear to cast more gloom for other Asian economies. The Fund expects South Korea’s economy to grow just 2% this year and a further 2.2% next year. Both projections are 0.6% adrift of what the IMF predicted in April.
Another major tourist destination and a core economy in Asia, Singapore, faces a similar predicament. The IMF predicts that the Singaporean economy will grow 0.5% this year. IMF however expects this to double to 1% growth in 2020. Both estimations are still lower than what the Fund projected in April. The IMF had put the projection for Singapore at 2.3% for 2019 and 2.4% for 2020.
In the report, the Fund says that the manufacturing sector is the worst hit and the one contributing to this slow growth. Although domestic demand remains unchanged, other aspects such as trade and investment have not fared well.
China Dragging Others Behind
The long-standing trade war between China and the USA is also taking its toll on the Asian economy significantly. While it may seem that the projected 5.8% economic growth for next year is favorable for the economy, it’s slower than for 2019. The Fund estimates that the Chinese economy will grow by at least 6.1% this year despite all other factors.
While this is good news, trade in Asia significantly slowed because of less participation by the Chinese. In particular, exports shrunk significantly, since China started imposing tariffs on goods coming into the country. This and other external risk factors such as the trade war and repercussions of Brexit could further affect the Asian economies.
The Fund also noted a particularly interesting thing; the Chinese economy is at risk of slowing faster than projected. While the 0.3% shrink between 2019 and 2020 seems normal, the Chinese economy could see more rapid slowdowns.
