Transcript of April 2020 Asia and Pacific Department Press Briefing
IMF News, April 16, 2020
Source details
- Canonical URL
- Transcript of April 2020 Asia and Pacific Department Press Briefing
Other formats
Bibliographic details
- Published: April 16, 2020
Key messages and overview
- "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."
Reasons the 2020 slowdown is sharper than during the Global Financial Crisis
- 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).
Country growth projections and notable statistics (2020 unless otherwise stated)
- 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."
Sectoral impacts and winners/losers
- 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.
Policy recommendations and priorities
- 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.
Fiscal and monetary policy stance in select countries
- 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.
IMF role, instruments, and regional engagement
- "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).
Capital flows, reserve currency, and savings-investment patterns
- 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.
Uncertainty, scenarios, and risks
- 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.