{
  "title": "Asia Growth Slows on Commodities, Covid and Rising Interest Rates",
  "publication": "IMF Blog, April 25, 2022",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2022/04/25/blog-asia-growth-slows-on-commodities-covid-and-rising-interest-rates",
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  "summary": "Region’s policymakers face difficult policy trade-offs and should protect the most vulnerable from rising fuel and food costs while enacting economic reforms to boost long-term growth.",
  "sections": [
    {
      "heading": "Regional growth outlook and inflation",
      "content": "- Regional gross domestic product will expand by 4.9 percent, 0.5 percentage points less than we forecast in January and slower than last year’s 6.5 percent growth rate.\n- Inflation is estimated to rise faster in many countries, though from relatively low levels.\n- Our latest World Economic Outlook lowered the 2022 global growth estimate by 0.8 percentage point to 3.6 percent.\n- The World Economic Outlook reduction reflects a 1.1 percentage point cut for the euro area, now seen expanding 2.8 percent.\n- We project growth in China to slow to 4.4 percent this year."
    },
    {
      "heading": "Main headwinds and transmission channels",
      "content": "- War in Ukraine\n  - Poses the biggest challenge for economic growth.\n  - Advanced economies in the region hurt most by reduced demand from Europe.\n  - Emerging markets affected via higher global commodity prices.\n- Global commodity price shocks\n  - Most of Asia’s emerging and developing economies are net importers of oil, gas, and metals, making them vulnerable to rising global commodity prices.\n  - Deterioration in terms of trade will likely reduce growth, weaken currencies, and worsen current-account balances.\n  - High food and fuel costs add to inflation pressures, especially in lower-income countries where they constitute a large share of consumer spending.\n- Covid-19 developments\n  - Coronavirus infections in most of Asia have retreated from omicron peaks and mobility indicators are approaching pre-pandemic levels.\n  - China is a notable exception: lockdowns in Shanghai and elsewhere idle a wide range of activity and threaten further disruptions to regional and global supply chains.\n- Tightening global financial conditions\n  - Government bond yields in major Asian economies have begun rising as the Federal Reserve starts to lift US interest rates.\n  - Forecasts assume continued tightening abroad and rising inflation at home will lead many Asian central banks to hike rates, placing a drag on investment.\n- Longer-term risks\n  - Intensification of the war in Ukraine could further increase food and energy prices, stressing vulnerable households and potentially causing social unrest.\n  - A materially faster or larger tightening of US monetary policy than markets expect could cause disruptive capital outflows; downside risk is mitigated where countries have strong buffers and amplified where high debt exists.\n  - A greater slowdown in China due to broader lockdowns or continued weakness in the real estate sector would have large implications for the region.\n  - Potential fragmentation of supply chains and added geopolitical tensions are longer-term risks to a region that has benefited from globalization."
    },
    {
      "heading": "Policy trade-offs and recommended responses",
      "content": "- Overarching principle\n  - Strong and coordinated policy responses tailored to country-specific circumstances are required to address pressures on growth and manage short-term trade-offs.\n- Protect the most vulnerable from rising fuel and food costs\n  - Examples of targeted and temporary protections: a Philippine cash-transfer program and New Zealand’s reduction in public transport fares.\n  - Social unrest has already flared where these pressures exacerbate vulnerabilities, such as Sri Lanka.\n- Anchor medium-term fiscal policy frameworks to ensure debt sustainability\n  - With output gaps still large in many countries, withdrawal of fiscal stimulus must be well calibrated to support the pandemic recovery.\n  - Some countries with fiscal space, including China and Japan, responded to recent headwinds with fiscal measures to support recovery this year.\n  - Countries most vulnerable to debt distress will need consolidation sooner, and some may benefit from debt treatment under the Common Framework.\n- Monetary and macroprudential policy\n  - Tighten monetary policy where inflation is rising faster, such as Singapore, or above central-bank targets, as in Korea.\n  - Use macroprudential policies to limit financial stability risks amid high household debt levels, including addressing significant increases in housing prices in some countries.\n- Structural reforms to boost long-term growth\n  - Enact economic reforms, particularly in Asia’s emerging economies, to mitigate scarring from the pandemic.\n  - Overhauls needed in areas that boost productivity, such as non-tariff barriers and product and labor markets.\n  - Education reforms are essential to address long-term effects of school closures, which were substantial in South Asia and low-income and developing countries.\n\nIMF Blog: Asia Growth Slows on Commodities, Covid and Rising Interest Rates — April 25, 2022\n\n---\n\n\n References\n\n- Russia’s invasion of Ukraine\n- https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Chart-1.jpg\n- World Economic Outlook\n- especially in lower-income countries\n- Common Framework\n- long-term effects of school closures\n- https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Table-Final.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2022/04/25/blog-asia-growth-slows-on-commodities-covid-and-rising-interest-rates"
    }
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    "Authors: Anne-Marie Gulde-Wolf, Shanaka J Peiris",
    "Published: April 25, 2022",
    "Regional gross domestic product will expand by 4.9 percent, 0.5 percentage points less than we forecast in January and slower than last year’s 6.5 percent growth rate.",
    "Inflation is estimated to rise faster in many countries, though from relatively low levels.",
    "Our latest World Economic Outlook lowered the 2022 global growth estimate by 0.8 percentage point to 3.6 percent.",
    "The World Economic Outlook reduction reflects a 1.1 percentage point cut for the euro area, now seen expanding 2.8 percent.",
    "We project growth in China to slow to 4.4 percent this year.",
    "War in Ukraine",
    "Global commodity price shocks",
    "Covid-19 developments",
    "Tightening global financial conditions",
    "Longer-term risks",
    "Overarching principle",
    "Protect the most vulnerable from rising fuel and food costs",
    "Anchor medium-term fiscal policy frameworks to ensure debt sustainability",
    "Monetary and macroprudential policy",
    "Structural reforms to boost long-term growth",
    "[Russia’s invasion of Ukraine](https://www.imf.org/en/Topics/IMF-and-Ukraine)",
    "[https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Chart-1.jpg](https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Chart-1.jpg)",
    "[World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022)",
    "[especially in lower-income countries](https://blogs.imf.org/2022/03/16/war-fueled-surge-in-food-prices-to-hit-poorer-nations-hardest/)",
    "[Common Framework](https://blogs.imf.org/2021/12/02/the-g20-common-framework-for-debt-treatments-must-be-stepped-up/)",
    "[long-term effects of school closures](https://blogs.imf.org/2022/02/03/pandemic-scars-may-be-twice-as-deep-for-students-in-developing-countries/)",
    "[https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Table-Final.jpg](https://www.imf.org/wp-content/uploads/2022/04/APD-REO-Table-Final.jpg)"
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