Transcript of April 2020 Asia and Pacific Department Press Briefing

IMF News, April 16, 2020

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"These are highly uncertain and challenging times for the global economy and the Asia Pacific region is no exception."
"Asia’s growth rate in 2020 is expected to 0 percent."
"Asia has never experienced zero growth rate in the last 60 years."
"For 2021, there is hope. If containment policies succeed, we will see a rebound in growth."
"This is not a time for business as usual. Asian countries need to use all policy instruments in their arsenal."

Real sector, especially the service sector, is being hit hard by containment measures.
Advanced economies’ slowdown is much more severe, affecting Asia’s export sector:
- U.S. growth rate is ‑5.9 percent.
- Euro Area growth rate will be around -7.5 percent.
- Reference to an expected figure of -6.1 percent for advanced economies in one response.
China’s slowdown and more limited scope for stimulus compared with 2009 (China’s 2009 stimulus then was about 8 percent of GDP).

China: 1.2 percent; "We expect a rebound in economic activity later this year."
Japan: decline by 5.2 percent.
Korea: -1.2 percent.
India: revised down to 1.9 percent for Fiscal Year 2020.
Australia: -6.7 percent.
New Zealand: -7.2 percent.
ASEAN-5: -1.3 percent.
Frontier economies (Cambodia, Laos, Myanmar, Vietnam): "export and tourism-driven economies are likely to be significantly disrupted."
Pacific Island countries and small states: growth is expected to contract by about 2.3 percent.
Indonesia: revised GDP growth forecast to 0.5 percent for 2020 and 8.2 percent in 2021.
Cambodia: revised to -1.5 percent; prior to the crisis expected growth was 7 percent (implying "more than 8.5 percent decline compared with our pre-crisis forecast").
Global trade: "we are expecting that the global trade will shrink by close to 11 percent this year."

Service sector, especially tourism and airlines, hit very hard.
Manufacturing: some resilience initially (notably in China after February), but vulnerable to a projected global trade contraction.
Few sectoral winners: medical products, medicines, some IT-related teleconference products.
Many countries dependent on tourism and education (e.g., Australia, New Zealand, Thailand, Maldives) face larger hits.

First priority: support and protect the health sector.
Targeted support to hardest-hit households and firms; "protect people, jobs, and industries directly, not just through financial institutions."
Use monetary policy and macroprudential policy and regulation flexibly to provide ample liquidity to viable industries and small and medium enterprises.
For emerging markets with limited fiscal space: consider using central bank balance sheets flexibly to help small and medium enterprises through risk sharing with the government.
Contain external pressure: seek bilateral and multilateral swap lines and financial support from multilateral institutions.
Temporary capital flow measures: may have a role to secure external sector stability as a prerequisite for using more aggressive domestic policies; if used, "it should be temporary, and it should be implemented with a clear active policy."
Targeted support combined with domestic demand stimulus in a recovery phase to reduce scarring, with emphasis that support "needs to reach people in smaller firms."
Priority to prevent liquidity problems turning into solvency/bankruptcy problems for small and medium enterprises and the self-employed.

China: announced fiscal packages "is around 3 percent GDP"; "they have more room to use more monetary and fiscal policies" if needed.
Japan: April 7 package amounts to 20 percent of GDP; of which 10 percent is "pure fiscal policy" and 10 percent is "loan and other quasi fiscal activities through the financial sector." Emphasis on medium-term fiscal consolidation after the emergency.
Singapore: set aside about 12 percent of its GDP for COVID-19 support measures; temporary increase in fiscal stimulus is justified given the unprecedented shock.
India: supportive view of the nationwide lockdown; existing fiscal and monetary easing "in the right direction" with further adjustment dependent on containment progress.
Thailand: announced about 3 percent of GDP fiscal packages and a reported second phase "close to 9 percent of GDP" (details to be checked).
Nepal: IMF provided debt relief of $4 million from the Catastrophe Containment and Relief Trust; Nepal requested the Rapid Credit Facility (RCF).
Maldives: RCF request about $29 million; IMF expects to process for Board consideration "sometime very soon, next week or week after."
Sri Lanka: submitted a letter for Rapid Financing Instrument (RFI); discussions underway on switching previous program into new Rapid Facilities.

"So far 17 Asian countries have expressed their interest in our two emergency financing instruments, the Rapid Credit Facility and the Rapid Financing Instrument."
Thanks conveyed to Japan and China for their contributions to the Catastrophe Containment and Relief Trust (CCRT) initiative.
IMF processing of Rapid Facilities and providing debt relief and emergency finance (examples: Nepal $4 million CCRT relief; Maldives RCF request).

Asia’s current current account surplus has declined from about 5 percent of GDP in 2007 to about 2 percent of GDP; China’s current account surplus was about 10 percent at the time and "now it is lower than 1 percent."
Dollar dominance in the region remains strong:
- "Many Asian Central Bank hold dollar as a reserve about 60-70 percent."
- "More than 80 percent of the Asian’s export are actually denominated dollar."
Recycling of Asian savings within the region has not materially reduced dollar dominance; trend reversed after the Global Financial Crisis.

Rebound in 2021 conditional on successful containment; "it is highly uncertain how this year will progress."
Upside risk: quick development of a vaccine enabling early recovery.
Downside risk: prolonged global spread means Asia's export dependence could make current forecasts too optimistic.
Characterization of recovery: while technical rebounds are possible, output levels in 2021 may remain below pre-crisis forecasted levels.

Transcript of April 2020 Asia and Pacific Department Press Briefing, IMF Communications Department, April 15, 2020.