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IMF / ASIA OUTLOOK
STORY: IMF / ASIA OUTLOOK
TRT: 2.27
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: RECENT, WASHINGTON D.C.
RECENT – HONG KONG
1. Wide shot Hong Kong harbor
RECENT – WASHINGTON D.C.
2. SOUNDBITE (English) Anoop Singh, Director, Asia Pacific Department, IMF:
“What we’re seeing is that domestic demand in Asia has remained strong. This has been for a number of factors. Certainly financial policies are accommodative. We have low unemployment. We have spillovers from a pick-up in growth in China. But I would say this: we are seeing greater regional trade in final consumer products that shows that rebalancing is taking place in Asia.”
RECENT – BEIJING, CHINA
3. People shopping
RECENT – WASHINGTON D.C.
4. SOUNDBITE (English) Anoop Singh, Director, Asia Pacific Department, IMF:
“Asian economies are highly integrated in trade. And were that trade to be disrupted, the supply train for example, it would have effects. Were China to slow down unexpectedly that would have clear effects. But looking domestically, we are seeing in many countries continuing accommodative financial policies. We are concerned that this is leading to higher asset prices and concerns from credit ratios in many economies.”
RECENT- HYDERABAD, INDIA
5. Various, traffic
RECENT – WASHINGTON D.C.
6. SOUNDBITE (English) Anoop Singh, Director, Asia Pacific Department, IMF:
“There is room to improve the efficiency of public spending in many countries in Asia. For example, look at many ASEAN countries. You will see that public spending on health and education are significantly lower than comparators, probably 4 percent of GDP lower. This needs to improve to increase the sustainability of growth in many countries in Asia and improve the inclusive nature of this growth.”
RECENT – BANGKOK, THAILAND
7. Wide shot, metro train passing by
8. Close up, “Bangkok” sign
After a year of subdued economic performance, growth in Asia is set to pick up this year driven largely by continued robust domestic demand, says the IMF in its latest Regional Economic Outlook, which predicts growth will reach about 5¾ percent. As a result, the region is expected to lead the global three-speed recovery.
“What we’re seeing is that domestic demand in Asia has remained strong. This has been for a number of factors. Certainly financial policies are accommodative. We have low unemployment. We have spillovers from a pick-up in growth in China. But I would say this: we are seeing greater regional trade in final consumer products that shows that rebalancing is taking place in Asia,” said Anoop Singh, Director of the Asia Pacific Department at the IMF.
Consumption and private investment will be supported by favorable labor market conditions—unemployment is at multiyear lows in several economies—and relatively easy financial conditions, suggests the report.
Asia should also benefit from intraregional demand spillovers mainly reflecting growing Chinese demand and policy stimulus in Japan but also, in the case of ASEAN economies, growing integration in final consumer goods trade.
But as the report also makes clear, the favorable outlook is not without risks. While the external risk of severe economic fallout from an acute euro area crisis has diminished, regional risks are coming into clearer focus.
Financial imbalances and rising asset prices, fueled by strong credit growth and easy financing conditions, are building in several Asian economies.
“Asian economies are highly integrated in trade. And were that trade to be disrupted, the supply train for example, it would have effects. Were China to slow down unexpectedly that would have clear effects. But looking domestically, we are seeing in many countries continuing accommodative financial policies. We are concerned that this is leading to higher asset prices and concerns from credit ratios in many economies,” said Anoop Singh, Director, Asia Pacific Department, IMF.
A number of other regional risks are more difficult to anticipate but could prove disruptive given Asia’s highly integrated supply-chain network and growing dependence on regional demand and finance.
These include trade disruptions from a natural disaster or geopolitical tensions, a loss of confidence in Japan’s efforts to restore economic health, or an unexpected slowdown in China.
The report’s authors say policy makers in the region face a delicate balancing act in the near term: guarding against the potential buildup of financial imbalances while delivering appropriate support for growth.
With inflation remaining low and stable, the current accommodative stance has generally served the region well. But financial imbalances are often persistent and cannot be easily unwound, says the report, which adds that output levels are close to or slightly above trend in most economies.
In general, Asia has buffers to cope with such risks, as banking and corporate sector balance sheets remain generally sound, but these imbalances require careful monitoring, adequate supervision and a timely response.
Country circumstances—including the extent of demand pressures and the available policy space—will also determine the appropriate pace of fiscal consolidation.
“There is room to improve the efficiency of public spending in many countries in Asia. For example, look at many ASEAN countries. You will see that public spending on health and education are significantly lower than comparators, probably 4 percent of GDP lower. This needs to improve to increase the sustainability of growth in many countries in Asia and improve the inclusive nature of this growth,” Singh said.
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