Asia is on track to again deliver two-thirds of global growth in 2024, as it did in 2023, said Krishna Srinivasan, Director of the International Monetary Fund (IMF) Asia and Pacific Department. At a press conference on the Regional Economic Outlook, the IMF official said the news on the inflation front has also been mostly positive, thereby improving the prospects for a soft landing — after the Covid crisis.
For 2023, it estimated growth at 4.7 per cent, compared to its 4.6 per cent projection it had made in October. China and India account for most of the upward revision. In India, strong domestic demand underpinned another increase in its growth estimate. In China, growth was supported by higher spending on disaster reconstruction and resilience projects. It has also upgraded its regional growth forecast for 2024 to 4.5 per cent, from 4.2 per cent in October.
The firm growth projections in the region were part of the positive dynamic from last year carried over into 2024; demand for technology–computers, electronics, and optical products–has picked up in recent months, which benefits economies such as Korea and Singapore; and countries like China and Thailand have announced sizeable policy stimulus. On the other hand, it projected 3.1 per cent growth for 2024 on a global level–the same growth rate as in 2023. For 2025, it anticipates a modest increase to 3.2 per cent. “The good news is that these figures are somewhat better than the forecast we had in the October 2023 World Economic Outlook. The not-so-good news is that they remain significantly below the historical (2000-2019) average for global growth of 3.8 per cent,” the IMF official at the presser.
Moving on to inflation, global inflation is projected to fall from 6.8 per cent in 2023 to 5.8 per cent this year and to 4.4 per cent in 2025. “Core inflation is also on a downward trend,” he asserted. Core inflation is the change in the costs of goods and services, barring those from the food and energy basket. “In Asia, post-COVID price pressures were, on average, less intense than elsewhere to begin with. They are now receding rapidly. We estimate that average Asian inflation fell from 3.8 percent in 2022 to 2.6 percent in 2023, with particularly swift progress in emerging Asian economies. Many regional central banks are on course to reach their inflation targets in 2024. Provided policymakers hold steady until inflation is firmly re-anchored, scope for monetary easing may emerge later in the year,” he said. The regional growth average, however, hides significant divergence between countries.
In Japan, it expects growth to remain above potential but to slow from about 2 per cent in 2023 to about 1 per cent in 2024, as one-off factors that supported activity last year fade–including a depreciated yen, strong tourism, and a recovery in business investment. Growth in India, on the other hand, is expected to remain strong at 6.5 per cent in both 2024 and 2025. “For 2025, we project growth in the region to decelerate mildly to 4.3 per cent, reflecting to a large extent China’s growth slowdown,” he said.