{
  "title": "Transcript of the Regional Economic Outlook on Asia and Pacific Press Briefing",
  "publication": "IMF News, May 3, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/05/03/050223-apd-reo-transcript",
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  "summary": "Transcript of the Regional Economic Outlook on Asia and Pacific Press Briefing",
  "publishDate": "2023-05-03",
  "sections": [
    {
      "heading": "Regional growth outlook and drivers",
      "content": "- Asia and the Pacific: growth is expected to increase to 4.6 percent this year, up from 3.8 percent in 2022.\n- The region combined accounts for about 70 percent of global growth in 2023.\n- Two countries, India and China, account for about 50 percent of global growth.\n- The IMF revised Asia’s upward growth mainly due to China; the revision for China in 2023 was 0.8 percentage points (from 4.4 to 5.2 percent)."
    },
    {
      "heading": "China: reopening, composition, and risks",
      "content": "- China is expected to expand by 5.2 percent in 2023.\n- Q1 2023: strong rebound in consumption; recovery expected to be led by services (PMI surveys show relatively strong expansion, though manufacturing PMI surprised on the downside).\n- Composition shift: this recovery is consumption-led (not investment-led), implying stronger spillovers to countries exporting consumer goods and to tourism-dependent neighbors.\n- Property sector: recovering more slowly and expected to remain subdued; weaker developers and incomplete pre-sold housing remain sources of downside risk.\n- Long-term growth: revised to 3.4 percent; with reforms, long-term growth could be 1 percentage point higher."
    },
    {
      "heading": "Inflation and monetary policy in Asia-Pacific",
      "content": "- Headline inflation has been easing but remains above target in most economies in the region.\n- Core inflation is becoming a more important and stickier driver of headline inflation.\n- Drivers of stickiness: closing output gaps and exchange-rate depreciation passthrough to domestic prices.\n- Policy guidance: monetary policy in the region needs to remain tight until inflation falls durably back to target — “tighter for longer.”\n- Exceptions: China and Japan, where output is below potential and inflation expectations have stayed muted."
    },
    {
      "heading": "Fiscal policy, public debt, and non‑public debt vulnerabilities",
      "content": "- Public debt in Asia has risen compared to pre-pandemic levels.\n- Most governments in the region are expected to tighten budgets this year and the next.\n- Projected consolidation may not be sufficient to stabilize debt given higher interest rates; fiscal consolidation may need to be more aggressive to ensure sustainability over the medium term.\n- Policymakers must balance fiscal consolidation with supporting growth and protecting the vulnerable.\n- Elevated corporate and household debt create pockets of financial vulnerability; careful monitoring of market risks and corporate credit exposure is essential."
    },
    {
      "heading": "Financial risks and banking stress",
      "content": "- Global banking stress (U.S. and Europe) had limited direct impact on Asian markets so far.\n- Direct exposures of Asian banks and investors to Silicon Valley Bank were minimal.\n- Asian bank equity prices have largely recovered losses from the global selloff.\n- Market repricing of the federal funds rate led to lower U.S. Treasury yields, which contributed to falling Asian local-currency bond yields and a strengthening of Asian currencies.\n- Emerging pockets of private-sector stress: increased leverage and real estate sector risks.\n- Asian financial systems: generally well capitalized and with strong liquidity buffers, but financial supervisors must remain alert."
    },
    {
      "heading": "Country-specific highlights and outlooks",
      "content": "- China: 2023 growth expected at 5.2 percent; consumption-led recovery provides stronger spillovers to tourism destinations and consumer-goods exporters; property sector risks persist; policy space exists for accommodative monetary and fiscal support.\n- India: IMF forecast lowered to 5.9 percent from 6.1 percent for 2023 (modest revision reflecting slowing consumption); strong services exports are an upside.\n- Japan: IMF views Japan as an exception to regional monetary tightening given output below potential and muted inflation expectations; recommends greater flexibility in yields if policy normalization becomes necessary.\n- Sri Lanka:\n  - 2022 growth contracted by 8.7 percent.\n  - 2023 growth projected to contract by 3 percent before a mild recovery.\n  - IMF-supported program focuses on macro stabilization, revenue-based fiscal consolidation, reinning in inflation, governance and corruption diagnostics, protection for the poor and vulnerable, and a path toward debt sustainability; restructuring of private, official, and possibly domestic debt is part of restoring sustainability.\n  - IMF noted the program follows an assessment that debt was unsustainable and that debt agreements with creditors are necessary next steps.\n- Hong Kong:\n  - Q1 GDP growth announced at 2.7 percent.\n  - IMF’s 2023 growth projection for Hong Kong is 3.5 percent (an upgrade relative to the previous October projection).\n  - Fiscal position: fiscal reserves close to 30 percent of GDP; authorities are unwinding pandemic support and intend to restore fiscal balance.\n  - IMF supports continuity of the Linked Exchange Rate System, citing strong fundamentals and fiscal framework.\n  - Risks: external downside risks from global slowdown or tighter financial conditions; upside from pent-up domestic and regional demand as reopening continues."
    },
    {
      "heading": "Trade tensions, fragmentation, and long-term risks",
      "content": "- Risks from fragmentation and technological decoupling:\n  - If fragmentation proceeds, long-run losses could reach 7 percent of global output.\n  - Technological decoupling could add about 5 percent of output loss.\n  - Combined losses could be as high as 12 percent of global output if both occur.\n- Historical tariff impacts: tariffs between 2017 and now contributed to a 0.4 percent decline in global GDP in 2022.\n- Policy implication: fight fragmentation through multilateralism to avoid large permanent losses."
    },
    {
      "heading": "Policy recommendations and monitoring priorities",
      "content": "- Monetary policy: keep policy tight until inflation is durably back to target; exceptions where output below potential and muted inflation (China, Japan).\n- Fiscal policy: pursue credible consolidation to stabilize public debt, while protecting the vulnerable; revenue-based consolidation emphasized in cases like Sri Lanka.\n- Real estate and private-sector leverage: proactively address weak developers, resolve incomplete pre-sold housing, and monitor nonperforming loans as forbearance is phased out.\n- Financial supervision: strengthen capital and liquidity buffers, escalate supervision where smaller banks and local government pressures are concentrated, and prepare for orderly restructuring where needed.\n- International cooperation: resist fragmentation and technological decoupling; preserve multilateral trade and technology links to avoid large, lasting output losses.\n\nTranscript of the Regional Economic Outlook on Asia and Pacific Press Briefing — May 3, 2023, IMF Communications Department.\n\n---\n\n\n References\n\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/05/03/050223-apd-reo-transcript"
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    "Published: May 3, 2023",
    "Asia and the Pacific: growth is expected to increase to 4.6 percent this year, up from 3.8 percent in 2022.",
    "The region combined accounts for about 70 percent of global growth in 2023.",
    "Two countries, India and China, account for about 50 percent of global growth.",
    "The IMF revised Asia’s upward growth mainly due to China; the revision for China in 2023 was 0.8 percentage points (from 4.4 to 5.2 percent).",
    "China is expected to expand by 5.2 percent in 2023.",
    "Q1 2023: strong rebound in consumption; recovery expected to be led by services (PMI surveys show relatively strong expansion, though manufacturing PMI surprised on the downside).",
    "Composition shift: this recovery is consumption-led (not investment-led), implying stronger spillovers to countries exporting consumer goods and to tourism-dependent neighbors.",
    "Property sector: recovering more slowly and expected to remain subdued; weaker developers and incomplete pre-sold housing remain sources of downside risk.",
    "Long-term growth: revised to 3.4 percent; with reforms, long-term growth could be 1 percentage point higher.",
    "Headline inflation has been easing but remains above target in most economies in the region.",
    "Core inflation is becoming a more important and stickier driver of headline inflation.",
    "Drivers of stickiness: closing output gaps and exchange-rate depreciation passthrough to domestic prices.",
    "Policy guidance: monetary policy in the region needs to remain tight until inflation falls durably back to target — “tighter for longer.”",
    "Exceptions: China and Japan, where output is below potential and inflation expectations have stayed muted.",
    "Public debt in Asia has risen compared to pre-pandemic levels.",
    "Most governments in the region are expected to tighten budgets this year and the next.",
    "Projected consolidation may not be sufficient to stabilize debt given higher interest rates; fiscal consolidation may need to be more aggressive to ensure sustainability over the medium term.",
    "Policymakers must balance fiscal consolidation with supporting growth and protecting the vulnerable.",
    "Elevated corporate and household debt create pockets of financial vulnerability; careful monitoring of market risks and corporate credit exposure is essential.",
    "Global banking stress (U.S. and Europe) had limited direct impact on Asian markets so far.",
    "Direct exposures of Asian banks and investors to Silicon Valley Bank were minimal.",
    "Asian bank equity prices have largely recovered losses from the global selloff.",
    "Market repricing of the federal funds rate led to lower U.S. Treasury yields, which contributed to falling Asian local-currency bond yields and a strengthening of Asian currencies.",
    "Emerging pockets of private-sector stress: increased leverage and real estate sector risks.",
    "Asian financial systems: generally well capitalized and with strong liquidity buffers, but financial supervisors must remain alert.",
    "China: 2023 growth expected at 5.2 percent; consumption-led recovery provides stronger spillovers to tourism destinations and consumer-goods exporters; property sector risks persist; policy space exists for accommodative monetary and fiscal support.",
    "India: IMF forecast lowered to 5.9 percent from 6.1 percent for 2023 (modest revision reflecting slowing consumption); strong services exports are an upside.",
    "Japan: IMF views Japan as an exception to regional monetary tightening given output below potential and muted inflation expectations; recommends greater flexibility in yields if policy normalization becomes necessary.",
    "Sri Lanka:",
    "Hong Kong:",
    "Risks from fragmentation and technological decoupling:",
    "Historical tariff impacts: tariffs between 2017 and now contributed to a 0.4 percent decline in global GDP in 2022.",
    "Policy implication: fight fragmentation through multilateralism to avoid large permanent losses.",
    "Monetary policy: keep policy tight until inflation is durably back to target; exceptions where output below potential and muted inflation (China, Japan).",
    "Fiscal policy: pursue credible consolidation to stabilize public debt, while protecting the vulnerable; revenue-based consolidation emphasized in cases like Sri Lanka.",
    "Real estate and private-sector leverage: proactively address weak developers, resolve incomplete pre-sold housing, and monitor nonperforming loans as forbearance is phased out.",
    "Financial supervision: strengthen capital and liquidity buffers, escalate supervision where smaller banks and local government pressures are concentrated, and prepare for orderly restructuring where needed.",
    "International cooperation: resist fragmentation and technological decoupling; preserve multilateral trade and technology links to avoid large, lasting output losses.",
    "[Transcripts](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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