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Economy
IMF CUTS EMERGING ASIA GROWTH ESTIMATE ON WAR, COVID LOCKDOWNS
Warns of 'significant slowdown' in global economic expansion
The IMF expects global gross domestic product to expand 3.6% in 2022, down from
the 4.4% predicted in January -- before Russia invaded Ukraine and before
lockdowns in China. (Source photos by Reuters)
KENTARO IWAMOTO and JACK STONE TRUITT, Nikkei staff writersApril 19, 2022 22:00
JSTUpdated on April 19, 2022 23:46 JST | Japan
CopyCopied
TOKYO/NEW YORK -- The International Monetary Fund has cut its growth forecast
this year for Asia's emerging economies to 5.4% from the 5.9% previously touted,
hit by spillover from the Ukraine war and COVID lockdowns in China.
In its World Economic Outlook report released Tuesday, the organization also
said it now expects global gross domestic product to expand 3.6% in 2022, down
from the 4.4% predicted in January -- before Russia invaded its neighbor.
"Economic damage from the conflict will contribute to a significant slowdown in
global growth in 2022," the IMF said. "A severe double-digit drop in GDP for
Ukraine and a large contraction in Russia are more than likely, along with
worldwide spillovers through commodity markets, trade and financial channels."
It projects Russia's economy will shrink 8.5% this year in the wake of economic
sanctions imposed by many of its trade partners, while Ukraine's is forecast to
plummet as much as 35%.
The report highlighted the severe impact of the war on Europe's economies, with
growth rates for Germany and Italy down by 1.7 and 1.5 percentage points,
respectively, from January estimates.
The conflict has also overshadowed Asia, with rising commodity prices and weaker
European demand for exports dragging on economies fighting to get back on track
after coronavirus-induced slumps. "Balances of external assets and external
debts are generally expected to deteriorate, particularly for net oil
importers," the report said.
India and Japan will feel the impact more than most, according to the report,
with growth projections reduced to 8.2% from 9.0% and to 2.4% from 3.3% for the
two nations, respectively. That comes amid weaker domestic demand as higher oil
prices weigh on private consumption and investment.
"The war also increases the risk of a more permanent fragmentation of the world
economy into geopolitical blocks with distinct technology standards,
cross-border payment systems and reserve currencies," said Pierre-Olivier
Gourinchas, IMF economic counselor and director of research, in a news
conference. "Such a tectonic shift would cause long run efficiency losses,
increased volatility and represent a major challenge to the rules-based
framework that has governed international economic relations for the last 75
years. Uncertainty around these projections is considerable, well beyond the
usual range."
China's strict zero-COVID strategy, which has prompted huge lockdowns in some of
the country's major cities, has choked supply chains around Asia, the IMF
continued.
"Recent lockdowns in key manufacturing and trading hubs such as Shenzhen and
Shanghai will likely compound supply disruptions elsewhere in the region and
beyond. Moreover, real estate investment growth has slowed significantly," the
IMF said.
It now expects China's economy to grow 4.4% in 2022, down from its January
projection of 4.8%, while it crimped its forecast for five major members of the
Association of Southeast Asian Nations -- Indonesia, Malaysia, the Philippines,
Thailand and Vietnam -- to 5.3% from 5.6%.
The IMF noted "unusually high uncertainty" surrounding the latest forecast,
pointing to downside risks such as a possible worsening in the Ukraine war, the
escalation of sanctions on Russia, a sharper-than-anticipated deceleration in
China and the potential emergence of a new strain of the coronavirus.
"Moreover, the war in Ukraine has increased the probability of wider social
tensions because of higher food and energy prices, which would further weigh on
the outlook," it added.
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