WASHINGTON: Asia is expected to remain the world’s economic growth leader with an overall growth of around 5.3 percent for 2014, International Monetary Fund (IMF) said on Saturday.
“In our view, Asia will remain the global growth leader,” IMF Asia and Pacific department director Anoop Singh said.
He noted that overall, the institution is “essentially optimistic” despite the “complex global economic environment.”
Emerging Asia is projected to grow at around 6.3 percent and 6.5 percent in 2013 and 2014. Growth prospects are weaker throughout emerging Asia as sagging demand from advanced economies and slowdown in China slowed industrial activity throughout much of the area.
Despite robust labor markets and generally supportive financial conditions, the report noted domestic demand also softened.
Tighter external funding conditions and homegrown structural impediments in a few countries will weigh on growth in emerging Asia but advanced economies will see stronger growth and domestic demand will remain “robust… underpinned by still rather favorable financial conditions and resilient labor markets,” the report said.
Growth in China is projected to decelerate to 7.6 percent in 2013 and 7.3 percent in 2014 as structural forces move China steadily onto a lower growth plane, the report continued.
Still, inflation will remain in check due to excess capacity in several industries and stable food prices, the report noted.
Japan’s growth upswing has been a bright spot in the region as the so-called Abenomics program—a stimulus package meant to rev up the country’s economic engines—reignited the economy and is starting to lift the country out of chronic deflation.
Financial conditions eased markedly from exchange rate depreciation and asset price rally triggered by quantitative and qualitative monetary easing, the IMF said.
Growth in Japan is likely to reach 3.5 percent year-on-year in the fourth quarter of 2013, driven by robust domestic demand and a better export picture supported by a weaker yen and recovering industrial country demand, it added.
Growth is forecast to decelerate to 1.2 percent in 2014, owing to waning reconstruction spending and the planned consumption tax increase with the latter temporarily raising headline inflation to 2.9 percent.
A new fiscal stimulus will be announced in December and poses an upside risk to the growth forecast, the IMF said.
In India, fallout from the recent financial stress likely contributed to greater vulnerability of corporate and bank balance sheets and a further downward revision of growth forecasts which are already very low in the historical context.
This reflects persistent supply constraints and slow progress on structural reforms.
Despite weak demand, however, food prices will likely keep headline inflation close to double digits, IMF said.
In Indonesia, growth is expected to slow – given tighter financing conditions and weakening investment – before some stabilization next year.
In most other ASEAN economies, growth should pick up somewhat.
External demand will improve while domestic demand is likely to prove resilient to tighter domestic financial conditions, partly reflecting stronger public infrastructure spending, the report added.