## Transcript of Asia Pacific Department April 2024 Press Briefing _IMF News, April 18, 2024_ ## Source details **Canonical URL:** [Transcript of Asia Pacific Department April 2024 Press Briefing](https://www.imf.org/en/news/articles/2024/04/18/tr041824-apd-press-briefing) ## Other formats - [Markdown version](/en/news/articles/2024/04/18/tr041824-apd-press-briefing/index.md) - [Structured JSON version](/en/news/articles/2024/04/18/tr041824-apd-press-briefing/index.json) - [Bundle manifest](/en/news/articles/2024/04/18/tr041824-apd-press-briefing/bundle-manifest.json) ## Bibliographic details - Published: April 18, 2024 --- ### Growth - Regional outturns and revisions - Growth for the region reached 5 percent in 2023, much stronger than a growth of 3.9 percent in 2022. - The 2023 outturn was 0.4 percentage points higher than what was projected in the October 2023 Regional Economic Outlook. - The region is projected to grow by 4.5 percent in 2024, an upward revision of 0.3 percentage points relative to October. - The region is projected to grow by 4.3 percent in 2025. - With this, Asia would contribute about 60 percent of global growth. - Drivers of growth (by country group) - China and India: investment expected to contribute disproportionately to growth, much of it public, especially in India. - Emerging Asia (outside China and India): robust private consumption will remain the main growth engine. - Some advanced economies (e.g., Korea): positive impulse from exports (including strong global demand for high end semiconductors); domestic demand to strengthen only gradually. ### Inflation and Monetary Policy - Regional inflation dynamics and groupings - Group 1 (inflation still above target): Korea, Australia, New Zealand — persistent price pressures from services. - Group 2 (headline and core inflation contained): most Asian emerging markets and Japan. - Group 3 (low inflation): China and Thailand — owed to falling commodity prices and weak demand. - Outlook and policy guidance - Expectation that inflation will converge to central bank targets, requiring a differentiated policy approach: - "Tighter for longer" stance where inflation is elevated. - Accommodative macroeconomic policies where there is sizable slack. - U.S. monetary policy impacts: - IMF staff analysis shows U.S. interest rates have a strong and immediate impact on Asian financial conditions and exchange rates. - Recommendation: Asian central banks should focus on domestic inflation and avoid making decisions overly dependent on anticipated Federal Reserve moves; following the Fed too closely could undermine domestic price stability. - Exchange rates and intervention views - Many Asian currencies have depreciated, largely reflecting interest rate differentials with the U.S. - On the Japanese yen: - The yen has depreciated by about 9 percent against the U.S. dollar so far this year (speaker’s assessment). - Japanese authorities are committed to a flexible exchange rate regime; G7 reaffirmation of commitment to a market-determined exchange rate was noted. - Guidance to authorities: allow exchange rates to move to act as shock absorbers while focusing monetary policy on domestic inflation pressures. ### China: Performance, Risks, and Policy Implications - Recent data and assessment - China's GDP in the first quarter of 2024 grew by 5.3 percent year-on-year. - The Q1 outturn was higher than staff projections (staff projection cited as 4.6 percent) and higher than market projections. - Other high-frequency indicators (manufacturing and PMI services in March) were reported as "quite strong". - The property sector remains subdued; inflation turned negative in late 2023 and early 2024 but returned to positive in February (March CPI cited as 0.1 percent in baseline remarks). - Spillovers and channels - A more protracted slowdown in China would negatively affect the region through multiple channels: - Lower Chinese export prices (observed in H2 2023) can pressure profit margins of competitors and reduce export volumes for countries producing similar goods (e.g., Vietnam and Korea). - IMF past analysis cited: a one percentage point increase in Chinese growth has a 0.3 percentage point effect on growth in other countries in the region over the medium term. - Upside channel: robust, well-targeted policy support in China (for example, measures addressing stresses in the property sector) can restore consumer confidence and boost domestic demand. - Policy advice for China - Distinguish support that boosts domestic demand (e.g., addressing property sector stresses, strengthening social safety nets) from measures that primarily boost supply capacity (which could reinforce deflationary pressures). - Address misallocation risks: scale back industrial policies that distort competitive neutrality, and accelerate SOE reform to prevent prolonged support for unprofitable SOEs. ### Trade, Shipping Disruptions, and Geoeconomic Risks - Red Sea and shipping impacts - Attacks on cargo ships in the Red Sea forced rerouting of vessels between Asia and Europe, driving up container prices and shipping costs. - Shipping disruptions are particularly detrimental for Pacific Island countries that depend heavily on imports and are poorly connected to global shipping networks. - Geoeconomic fragmentation - Rapid implementation of trade restrictions in Asia and elsewhere poses a large risk; Asia has benefited substantially from trade integration, making geoeconomic fragmentation a major downside risk. ### Fiscal Policy and Debt Sustainability - Regional fiscal assessment and recommendations - Governments should focus on consolidation to curb the rise in public debt and rebuild fiscal buffers. - Forecasts show debt ratios would stabilize for most economies on current fiscal plans, provided governments underpin these plans with concrete policies and follow through. - Even with stabilization, debt would remain significantly higher than before the Pandemic. - Growth-friendly consolidation strategy - Priority on revenue mobilization: collect more revenue and streamline expenditure rather than across-the-board expenditure cuts that would harm growth. - Reducing debt service costs would free up budgetary space for development needs, social safety nets, and climate mitigation/adaptation. ### Country Highlights and Specific Figures - India - Registered strong growth; IMF projects 6.8 percent for FY ‘24, ‘25. - Drivers: private consumption and public investment (CapEx in infrastructure); some recent uptick in private investment. - Inflation about 4.7 percent (noted as "close to the mid target of 4 percent"). - Downside risks: volatile global commodity prices (notably oil), food price shocks, weather-related shocks, and geoeconomic fragmentation. - Policy priority: invest in education and health to equip a growing young labor force (about 15 million people added to the labor force every year). - Sri Lanka - Program outcomes/indicators cited: - Real GDP expanded by 3 percent year on year in the second half of 2023. - March inflation was 0.9 percent versus a 70 percent peak in September 2022. - Reserves increased by 2.5 billion in 2023. - Primary balance reached a surplus of 0.6 percent of GDP in 2023. - Caveat: negotiations on debt restructuring (official and private creditors) continue; progress with official creditors described as encouraging, private creditor discussions ongoing. - Ongoing priorities: fiscal consolidation, reserve rebuilding, structural reforms including governance and anti-corruption. - Vietnam - Projected growth "close to 6 percent in 2024" as a rebound from a challenging 2023. - Medium-term growth expectation: about 6.5 percent. - Drivers: relatively strong external demand and supportive policy stance; need to improve policy mix and business environment to realize potential. - Bangladesh - Program context: hit by multiple shocks; emphasis on monetary tightening to tackle high inflation. - Policy recommendation highlighted: transition to a more flexible exchange rate regime to build external resilience and reserves. - Korea - Export impulse expected from strong global demand for high end semiconductors. - Exchange rate moves: volatility noted but "limited currency mismatches and manageable pass through to inflation" reduce macro balance-sheet risks. - Monetary policy guidance: focus on domestic inflation (which remains above target in some economies), maintain a tight stance where appropriate. - Nepal and low-income countries - Concern highlighted: some low-income countries allocate more to debt repayment than capital expenditure, risking crowding out of capital spending. - Recommendation: pursue growth-friendly fiscal consolidation with emphasis on revenue mobilization (reduce exemptions, improve tax efficiency) rather than large cuts to capital spending. ### Near-term shocks and quantified effects - Example provided from IMF Research Department: - A 10 percent increase in oil prices would weigh down global output by 0.15 percent in the following year and increase global inflation by about 0.4 percentage points. - Implication: oil importers in the region (e.g., Nepal) would experience larger adverse impacts from oil price rises; shipping route disruptions (e.g., Red Sea) raise shipping costs and affect trade-dependent countries. ### Events and Next Steps - Regional Economic Outlook launch - The Regional Economic Outlook for Asia and Pacific will be launched on April 30th in Singapore. *Transcript of Asia Pacific Department April 2024 Press Briefing — IMF Communications Department, April 18, 2024* --- ## References - [Australia and the IMF](http://www.imf.org/external/country/AUS/index.htm) - [Bangladesh and the IMF](http://www.imf.org/external/country/BGD/index.htm) - [India and the IMF](http://www.imf.org/external/country/IND/index.htm) - [Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm) - [Nepal and the IMF](http://www.imf.org/external/country/NPL/index.htm) - [New Zealand and the IMF](http://www.imf.org/external/country/NZL/index.htm) - [Republic of Korea and the IMF](http://www.imf.org/external/country/KOR/index.htm) - [Singapore and the IMF](http://www.imf.org/external/country/SGP/index.htm) - [Sri Lanka and the IMF](http://www.imf.org/external/country/LKA/index.htm) - [Vietnam and the IMF](http://www.imf.org/external/country/VNM/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [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) _Source: https://www.imf.org/en/news/articles/2024/04/18/tr041824-apd-press-briefing_