Opening Remarks by Krishna Srinivasan, Director of the Asia and Pacific Department at the press conference on the release of the IMF’s Regional Economic Outlook for Asia and Pacific

IMF News, April 30, 2024

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Authors: Krishna Srinivasan
Published: April 30, 2024

Context and event details

By Krishna Srinivasan, Director of the Asia and Pacific Department
Singapore
April 30, 2024

Regional growth and disinflation — key findings

"The Asia-Pacific region is marked by both resilient growth and rapid disinflation."
Growth trajectory:
- Growth is better than previously projected but will slow from 5 percent in 2023 to 4.5 percent in 2024.
- The region "accounts for about 60 percent of global growth."
Drivers of growth are heterogeneous across the region:
- Resilient domestic consumption in most ASEAN countries.
- Strong public investment in China and, most notably, in India.
- A sharp uptick in tourism in the Pacific Island countries.
Disinflation patterns:
- Disinflation has advanced throughout the region, albeit at different speeds.
- In some economies, inflation "remains above target (e.g., Australia and New Zealand)."
- In others, it "is at or close to central bank targets (EMs and Japan)."
- Some economies face deflation risks (e.g., China and Thailand).

China as a regional risk amplifier

China presents both upside and downside risks:
- Policies addressing stresses in the property sector and boosting domestic demand will help China and the region.
- Sectoral policies that contribute to excess capacity will hurt China and the region.
- "Geoeconomic fragmentation remains a significant risk."

Policy recommendations and priorities

Monetary policy:
- "Asian central banks should continue to focus firmly on domestic price stability and avoid making policy decisions overly dependent on anticipated interest rate moves by the Federal Reserve."
Exchange rate policy:
- Asian countries are "well placed than before to cope with exchange rate movements (fewer financial frictions and better macro-fundamentals and institutional frameworks)" and "should continue to allow the exchange rate to act as a buffer against shocks."
Fiscal policy:
- "Advancing fiscal consolidation is an urgent priority both to lessen the burden of higher debt levels and interest costs and to rebuild the fiscal space needed to address medium-term structural chal-lenges."
Financial supervision:
- "Supervisors should continue to vigilantly monitor the buildup of risks associated with the pass-through of tighter monetary policies to corporate and household balance sheets."
Industrial policy risks:
- Industrial policies, rising in Asia and the Pacific and globally, "can lead to unintended consequences, such as trade distortions which risk reinforcing fragmentation."

Selected enumerated points from the remarks

1. The Asia-Pacific region is marked by both resilient growth and rapid disinflation.
2. Growth is better than previously projected but will slow from 5 percent in 2023 to 4.5 percent in 2024. The region remains inherently dynamic and accounts for about 60 percent of global growth.
3. Drivers of growth are as heterogenous as the region, straddling from resilient domestic consumption in most ASEAN countries, to strong public investment in China and, most notably in, India, and to a sharp uptick in tourism in the Pacific Island countries.
4. Disinflation has advanced throughout the region, albeit at different speeds—in some, it remains above target (e.g., Australia and New Zealand), in others, it is at or close to central bank targets (EMs and Japan), while in some there are deflation risks (e.g., China and Thailand).
5. China is a source of both upside and downside risks. Policies aimed at addressing stresses in the property sector and to boost domestic demand will both help China and the region. But sectoral policies contributing to excess capacity will hurt China and the region. Geoeconomic fragmentation remains a significant risk.
6. Asian central banks should continue to focus firmly on domestic price stability and avoid making policy decisions overly dependent on anticipated interest rate moves by the Federal Reserve.
7. Asian countries are well placed than before to cope with exchange rate movements (fewer financial frictions and better macro-fundamentals and institutional frameworks) and should continue to allow the exchange rate to act as a buffer against shocks.
8. Advancing fiscal consolidation is an urgent priority both to lessen the burden of higher debt levels and interest costs and to rebuild the fiscal space needed to address medium-term structural chal-lenges.
9. Supervisors should continue to vigilantly monitor the buildup of risks associated with the pass-through of tighter monetary policies to corporate and household balance sheets.
10. Industrial policies, which have been on the rise in Asia and the Pacific region and globally, can lead to unintended consequences, such as trade distortions which risk reinforcing fragmentation.

Opening Remarks by Krishna Srinivasan, Director of the Asia and Pacific Department at the press conference on the release of the IMF’s Regional Economic Outlook for Asia and Pacific, April 30, 2024, Singapore