Asia must push ahead with reform

Lender sees risks to Asian growth including tightening of global liquidity

Redevelopment  works in Shenyang, Liaoning province, China: Asia faces four main risks this year and next, the International Monetary Fund says, including a  sharper-than-forecast slowdown in China. Photograph:  Reuters

Redevelopment works in Shenyang, Liaoning province, China: Asia faces four main risks this year and next, the International Monetary Fund says, including a sharper-than-forecast slowdown in China. Photograph: Reuters

Tue, May 6, 2014, 01:02

Asia faces four main risks this year and next, the International Monetary Fund says, including a tightening of global liquidity, a sharper-than-forecast slowdown in China, fading effectiveness of growth-supporting policies in Japan, and political and geopolitical tensions that disrupt trade.

To ensure the region continues to lead global economic growth and withstand bouts of volatility as the US cuts monetary stimulus, Asian policymakers need to stick to structural reforms, the Washington-based lender said.

“Asia is well positioned to meet the challenges ahead provided it stays the course on reforms,” the IMF said in its Regional Economic Outlook for Asia and Pacific.

Economic growth in Asia is projected to remain steady at 5.4 per cent this year and 5.5 per cent next. “Reforms are critical not only to sustain Asia’s growth leadership over the medium term, but also, in some cases, to maintain investor confidence and secure financial stability in the near term.”

Despite these potential risks, economic growth in Asia will be more than double that of advanced nations. Growth in the major emerging Asian nations, including China and India, will be three times faster.

The IMF expects China to expand 7.5 per cent this year and 7.3 per cent next, with Japan 1.4 per cent and 1 per cent. It expects India’s growth to recover to 5.4 per cent in 2014-15.

A sharper slowdown in China would have “significant spillovers” for the region, especially in economies linked to the regional supply chain and commodity exporters, according to the report. A sudden or sharper-than-anticipated tightening of global financial conditions remains “a key downside risk” for Asia, the IMF said.

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