Part 1 News: Growing Too Slow

IMF trims Asian growth forecasts as risks grow

Regional News

HONG KONG — The International Monetary Fund trimmed its economic growth forecasts for Asia on Thursday because of financial turbulence in Europe and a possible slowdown in the U.S.

The risks to Asia’s growth are “decidedly tilted to the downside” reflecting the negative outlooks for Europe and the U.S., which are the major markets for the region’s exports, the IMF said in a twice-yearly report.

Asia’s economic growth is forecast to average 6.3 percent in 2011, rising to 6.7 percent in 2012. That’s lower than the IMF’s April forecast of nearly 7 percent in both years.

The report covers 20 economies in a vast region stretching from India to Japan to New Zealand.

IMF officials warned that an escalation of the debt crisis affecting nations that use the euro, and a more severe slowdown in the United States, would hit Asia too.

“Although domestic demand remains strong, we cannot assume Asia will be immune from the risks if they materialize in the rest of the world,” said IMF Asia-Pacific Director Anoop Singh.

Any worsening of Europe’s debt crisis, in particular, “poses an extreme downside risk for Asia,” the report said. The panic-driven selling in stock markets across Asia in August and September amid Europe’s intensifying financial woes showed there’s “no place to hide” when advanced economies come under pressure, it said.

After a strong start in the first quarter, Asian economic growth slowed because of sluggish demand from advanced economies and a devastating tsunami in Japan in March that disrupted industrial production and export growth across the region. Economic indicators suggest the slowdown continued into the third quarter, the report said.

Despite lowered forecasts, Asian growth will still be strong compared with U.S. and Europe thanks to strong domestic consumption and investment spending in many of the region’s economies, Singh said.

The IMF raised its forecast for Japanese economic growth to 2.3 percent in 2012 after an expected 0.5 percent contraction in 2011 as the country’s industrial production returned to normal over the summer. The fund had predicted in April that Japan would shrink 1.9 percent this year and eke out 0.2 percent growth next year.

Inflation is still strong in a number of Asian countries but the report said consumer prices are expected to peak in the second half of 2011 before easing as food and energy prices “gradually moderate.”

However, inflation will still be higher than average, partly because China’s strong demand for metals, food and other commodities will spill over to the rest of the region.

Follow Kelvin Chan at twitter.com/chanman
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By: Kelvin Chan, AP
Source: Forbes.com, Oct. 13, 2011
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