IMF warns of ‘stagflation’ risks in Asia, cuts growth outlook

TOKYO (REUTERS) – The Asian area faces a “stagflationary” outlook, a senior International Monetary Fund (IMF) official warned on Tuesday (April 26), citing the conflict in Ukraine, a spike in commodity prices and a slowdown in China as creating vital uncertainty.

While Asia’s commerce and monetary exposures to Russia and Ukraine are restricted, the area’s economies will likely be affected by the disaster by way of increased commodity costs and slower growth in European buying and selling companions, mentioned Ms Anne-Marie Gulde-Wolf, performing director of the IMF’s Asia and Pacific Department.

Moreover, she famous that inflation in Asia can be beginning to choose up at a time when China’s financial slowdown is including to strain on regional growth.

“Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected and inflation being higher,” she advised an internet information convention in Washington.

The headwinds to growth come at a time when coverage house to reply is proscribed, mentioned Ms Gulde-Wolf, including that Asian policymakers will face a tough trade-off of responding to slowing growth and rising inflation.

“Monetary tightening will be needed in most countries, with the speed of tightening depending on domestic inflation developments and external pressures,” she mentioned.

The United States Federal Reserve’s anticipated regular rate of interest hikes additionally current a problem to Asian policymakers given the area’s large dollar-denominated debt, Ms Gulde-Wolf mentioned.

In its newest forecast issued this month, the IMF mentioned it anticipated Asia’s financial system to develop 4.9 per cent this 12 months, down 0.5 share level from its earlier projection made in January.

Inflation in Asia was now anticipated to hit 3.4 per cent in 2022, 1 share level increased than forecast in January, it mentioned.

An additional escalation in the conflict in Ukraine, new Covid-19 waves, a faster-than-expected Fed charge hike trajectory and extended or extra widespread lockdowns in China are amongst risks to Asia’s growth outlook, Ms Gulde-Wolf mentioned.

“There is significant uncertainty around our baseline forecasts, with risks tilted to the downside,” she added.

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