IMF warns of ‘stagflationary’ risks in Asia, cuts growth outlook
By Leika Kihara
(Reuters) -The Asian area faces a “stagflationary” outlook, a senior Worldwide Financial Fund (IMF) official warned on Tuesday, citing the Ukraine battle, spike in commodity prices and a slowdown in China as creating vital uncertainty.
Whereas Asia’s commerce and monetary exposures to Russia and Ukraine are restricted, the area’s economies will likely be affected by the disaster by means of greater commodity costs and slower development in European buying and selling companions, mentioned Anne-Marie Gulde-Wolf, appearing director of the IMF’s Asia and Pacific Division.
Furthermore, she famous that inflation in Asia can also be beginning to decide up at a time when China’s financial slowdown is including to stress on regional development.
“Subsequently, the area faces a stagflationary outlook, with development being decrease than beforehand anticipated, and inflation being greater,” she informed an internet information convention in Washington.
The headwinds to development come at a time when coverage area to reply is proscribed, Gulde-Wolf mentioned, including that Asian policymakers will face a tough trade-off of responding to slowing development and rising inflation.
“Financial tightening will likely be wanted in most international locations, with the velocity of tightening relying on home inflation developments and exterior pressures,” she mentioned.
The U.S. Federal Reserve’s anticipated regular rate of interest hikes additionally current a problem to Asian policymakers given the area’s large dollar-denominated debt, Gulde-Wolf mentioned.
In its newest forecast issued this month, the IMF mentioned it expects Asia’s financial system to increase 4.9% this yr, down 0.5 share factors from its earlier projection made in January.
Inflation in Asia is now anticipated to hit 3.4% in 2022, 1 share level greater than forecast in January, it mentioned.
An additional escalation within the battle in Ukraine, new COVID-19 waves, a faster-than-expected Fed price hike trajectory and extended or extra widespread lockdowns in China are amongst dangers to Asia’s development outlook, Gulde-Wolf mentioned.
“There may be vital uncertainty round our baseline forecasts, with dangers tilted to the draw back.” she mentioned.
(Reporting by Leika Kihara; Enhancing by Christian Schmollinger & Shri Navaratnam)
