Asia will grow an average of 5-1/2 percent this year, down from 6 percent in 2011, as the region posted the slowest growth during the first half of this year since the global financial crisis began, the International Monetary Fund (IMF) predicts.
“The key factor has been a sharp slowdown in exports, primarily Asia’s exports to Europe,” said Anoop Singh, head of the IMF’s Asia and Pacific department, at a press briefing held during the annual meetings of the IMF and World Bank in Tokyo, Japan.
Regional growth in 2013 is expected to be modest only, gradually picking up to about 6 percent, forecast the IMF’s “Regional Economic Outlook Update,” issued on October 12 in Tokyo. The slow uptick will be helped by resilient domestic demand, easy financing conditions, and the expected slow improvement in demand from advanced economies.
Domestic factors have also contributed to the slowdown in the region, including policies to engineer a soft landing in China, contraction of investment in India, and some loss of consumption momentum in Japan.
“This overall performance will be modest by recent Asian standards, but enviable by world standards,” Singh said. “Asia will remain the global growth leader, expanding over 2 percentage points faster than the world average next year,” he added.
But the outlook faces considerable risks, largely external, such as a worsening of the euro area crisis, failure to address the U.S. fiscal cliff, and a food price shock.
Singh said the main challenge for regional governments is to support noninflationary growth and maintain financial stability, while guarding against downside risks.
The best forms of insurance against external risk remain strengthening domestic sources of growth, instituting further reforms to sustain growth momentum, and furthering the open trade and investment regimes that have been instrumental to Asian economies’ success, the report said.
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