Asia Remains World's Engine Of Growth - IMF

COLOMBO (News 1st); Krishna Srinivasan, the IMF Director for the Asia-Pacific region, provided an optimistic outlook on Asia's economic growth, noting that Asia has brought inflation down to low and stable rates faster than other regions. 

Srinivasan noted that Asia's economies performed better than expected in the first half of the year, leading to an upgraded regional growth forecast of 4.6% for 2024 and 4.4% for 2025. 

He emphasized that Asia continues to be the world's growth engine, contributing 60% of global growth despite accounting for only about 40% of global GDP.

Looking ahead, domestic demand in advanced Asian economies is expected to strengthen as the effects of past monetary tightening diminish. Growth in India and China is projected to remain resilient, although it may slow slightly in 2025. Emerging markets outside China and India are anticipated to experience robust and broad-based growth.

Asia has successfully reduced inflation to low and stable rates faster than other regions. In Emerging Asia, the disinflation process is nearly complete. 

However, wage pressures in Australia and New Zealand have kept services inflation elevated, though these pressures are expected to subside within the next 12 months. This situation allows most Asian central banks to consider cutting interest rates earlier in the year, especially as the Federal Reserve has begun its easing cycle.

Srinivasan highlighted the need for Asian policymakers to navigate this environment carefully. While there is some room for monetary policy easing, fiscal policy remains constrained due to increased public debt during the pandemic. 

He emphasized the importance of budget reconsolidation to build buffers against downside risks and address long-term challenges such as climate change and population aging.