ISMR October 2022 | Page 74

EASTERN PROMISE
Image : Shutterstock . com .

EASTERN PROMISE

We highlight economic forecasts ; challenges ; trends and regional opportunities across Asia for manufacturers .
“ In April this year , the International Monetary Fund projected Asian GDP to grow by 4.9 per cent in 2022 .”

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ccording to the International Monetary Fund ( IMF ), the combination of pandemic , war in Ukraine and tighter global financial conditions will make 2022 another challenging year for Asia ’ s policymakers . Difficult choices lie ahead . Will they support growth through more stimulus ? Or withdraw that support to stabilise debt and inflation ? The trade-offs will be different , depending upon individual country circumstances . This requires calibrated policies and clear communication , said the IMF .
Asia remains the world ’ s most dynamic region , and an important source of global growth . However , inflation in Asia has started to rise following the spike in food and fuel prices . The shock from the war comes at a time when recovery from the pandemic is still incomplete and global financial conditions are tightening . New COVID waves are adding to headwinds in some countries ( most notably in China ). Lower growth in China is affecting many Asian trading partners that are tightly integrated . Monetary tightening in advanced economies is leading to higher interest rates in Asia as well , placing a further drag on growth .
“ These headwinds will exacerbate the medium-term scarring effects from the pandemic that many emerging and developing economies in the region are expected to suffer ; amplified by their higher debt burdens ,” explained the IMF .
Asia-Pacific outlook
In April this year , the IMF projected Asian GDP to grow by 4.9 percent in 2022 . Its growth forecast for China is around 4.4 per cent . Over the medium term , the potential fragmentation of supply chains and geopolitical tensions are major risks to a region that has benefited from globalisation and relative peace over the last two decades .
“ In the Asia-Pacific region , the war in Ukraine is affecting growth in two main ways : higher commodity prices and the effects of slower growth in Europe . Throughout Asia , consumers are feeling pain from higher food and energy prices . Exporters face weaker demand from their European trading partners . Strained supply chains make getting goods to market slower and more expensive ,” commented the IMF ’ s deputy managing director , Kenji Okamura , at a Regional Economic Outlook event in Tokyo on 20 May 2022 .
All of this adds to global inflationary pressures . In the U . S . and Europe , prices are now rising at the fastest rates in a generation . A decade of unconventional monetary accommodation is now being withdrawn faster than was previously expected . There is a risk that drifting inflation expectations could require an even more forceful tightening . The implications for global markets are being carefully considered around the world , he added .
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