IMF trims Asian growth forecast on virus concerns

WASHINGTON－The International Monetary Fund on Tuesday revised its 2021 economic growth forecast for Asia to 6.5 percent, down by 1.1 percentage points from its April projection, according to a newly released regional economic outlook report.

"The resurgence of the pandemic, amid initially low vaccination rates, slowed the recovery in the Asia-Pacific region, especially in emerging market and developing economies," Changyong Rhee, director of the IMF's Asia and Pacific department, said at an online news conference.

Noting that Asia-Pacific remains the fastest growing region in the world, Rhee said as vaccination rates accelerate, the region is expected to grow by 4.9 percent in 2022, 0.4 percentage point faster than projected in April.

The latest IMF forecast is broadly unchanged for advanced economies in 2021, with upgrades in South Korea and New Zealand, and downgrades for Japan and Australia. Most of the downgrades in the region come from emerging market and low-income countries, led by India and the Association of Southeast Asian Nations.

China is projected to grow by 8.0 percent in 2021, down by 0.4 percentage point from the April projection.

India is projected to grow by 9.5 percent after a sharp decline in 2020. While the pandemic surge earlier this year had a large adverse impact on growth, subsequent rebound in activity has gained strength.

The ASEAN-5 countries, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand, are still facing "severe challenges" from a resurgent virus and weakness in contact-intensive sectors.

"The divergence between Asian advanced economies and developing economies is deepening, with output levels in the emerging market economies and low-income countries expected to remain below pre-pandemic trends in the coming years, reflecting differences in policy support and vaccination rollout," Rhee said.

Downside risk

Rhee warned that the main downside risk for the Asian economy is related to evolving pandemic dynamics, such as the possibility of COVID-19 becoming endemic and lower vaccine efficacy against new variants.

Other factors, such as persistent global supply disruptions and weakening global value chain participation, elevated financial vulnerabilities in the corporate sector, and potential financial spillovers from US monetary policy tightening also pose important risks for the region.

Also on Tuesday, the IMF said its chief economist Gita Gopinath will return to Harvard University in January as planned when her public service leave of absence from the university ends.

Gopinath, the IMF's first female chief economist, joined the fund in October 2018 and led new IMF analytical research on the COVID-19 pandemic and vaccination targets as well as on climate change mitigation.